CONSULTANCY SOCIO-ECONOMIC-P T IN PAN-PEARL RIVER …

CONSULTANCY STUDY ON SOCIO-ECONOMIC-POLITICAL TRENDS

IN PAN-PEARL RIVER DELTA REGION

THIRD MONTHLY REPORT PART II

COVERING GUANGXI, YUNNAN, GUIZHOU, AND

SICHUAN

JANUARY 2005

CENTRAL POLICY UNIT HONG KONG SPECIAL ADMINISTRATIVE REGION

Socio-Economic-Political Trends in Pan-Pearl River Delta Region Guangxi, Yunnan, Guizhou, Sichuan (3rd Monthly Report)

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Table of Contents

I. Executive Summary ----------------------------------------------------------------- 5

II. Topical Analysis ---------------------------------------------------------------------

“Pan-PRD Tourism Cooperation: Opportunities for Hong Kong”

Part Two: South-western Region

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Guangxi Expands Tourism Cooperation with ASEAN Countries -------- 10

Yunnan Spurs Tourism Development ------------------------------------------- 14

Guizhou to Overcome the Dilemma of Having First Class Resources but Sub-standard Development------------------------------------------------------- 19

Non-State Capital Entering Sichuan’s Tourism Industry--------------------- 23

Opportunities and Obstacles Faced by Hong Kong When Developing Tourism Businesses in the Pan-PRD -------------------------------------------- 27

Hong Kong Can Participate in Pan-PRD Tourism Development and Construction Projects -------------------------------------------------------------- 31

III. Trends & Updates on the Four South-western Provinces/Region ------------- 37

Nanning City Strengthens Urban Construction in 2005 ---------------------- 38

Chinese Medicine Industry in Guangxi Attracts Attention ------------------ 40

Yunnan Province Draws in Foreign Capital --------------------------------- 42

Hekou in Yunnan Bridging Cooperation with Vietnam ---------------------- 44

Guiyang Developing into a Recycling Economy and Ecological City ----- 46

Energy Becomes One of Guizhou’s Pillar Industries ------------------------- 48

Sichuan to Consolidate Preferential Investment Policies Offered by Local Governments 50

Sichuan Asks Financial Institutions to Support Export-oriented Enterprises --------------------------------------------------------------------------

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Memorabilia of Pan-PRD Regional Cooperation ----------------------------- 54


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Table of Contents (continued)

IV. Data and Trends ---------------------------------------------------------------------- 59

Guangxi ----------------------------------------------------------------------------- 60

Yunnan ------------------------------------------------------------------------------ 61

Guizhou ----------------------------------------------------------------------------- 62

Sichuan ----------------------------------------------------------------------------- 63

Major Economic Indicators of Nine Pan-PRD Provinces/Region (Jan-Sep 2004)---------------------------------------------------------------------

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Nine Pan-PRD Provinces/Region: Statistics at a Glance (2003) ------------ 65

Nine Pan-PRD Provinces/Region: 10-Year Economic Trend (1994-2003) )-----------------------------------------------------------------------

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V. English-Chinese Glossary of Terms ----------------------------------------------- 69


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I. EXECUTIVE SUMMARY

1. Although Guizhou possesses rich tourism resources, it lags behind in the development of scenic spots. This is mainly due to the irregular practice in the transfer of operating rights of scenic spots in the province. As the threshold set for inviting investors is too low, some scenic spot developers do not have adequate capital for investment, nor concrete plans and targets for development. They just hold on to their developing and operating rights, and passively wait for the government to inject funds so they could readily reap the benefits. Without overcoming these bottlenecks, the development of Guizhou’s tourism industry will be seriously restrained. The lack of tourism infrastructure facilities also restricts the development of Guizhou’s tourism sector. For example, in Anshun city, where Guizhou’s flagship tourist spot Huangguoshu Waterfalls Scenic Area is located, there are currently only 12 two- and three-star hotels. After receiving guests attending conferences and tourists visiting relatives, these hotels have very limited capacity to accommodate tour groups. In terms of tourism products, what Guizhou offers now are mostly lower-end sightseeing tours, where the duration of stay of the tourists is short, and the spending on shopping and entertainment tends to be low. As such, the service chain of Guizhou’s tourism is short and the value-added of the industry is low. These are the underlying factors impeding the development of the tourism industry in Guizhou. In order to raise the value-added of its tourism sector and strengthen its competitiveness, the provincial government has called for a transformation and upgrade of the traditional sightseeing tours. Scientific and cultural contents will be added to the tourism products to increase the share of tourists with higher spending power in Guizhou.

2. As a province rich in tourism resources, Sichuan accounts for 15 of the Mainland’s

175 national scenic spots, ranking the second highest in the country. Despite this, the present scale of tourism industry in Sichuan remains relatively small, and its status as a pillar industry in the province’s economic development has yet to be established. According to estimates, to achieve its tourism development targets, Sichuan needs to invest at least Rmb50 billion in the next ten years. Experts believe the quickest and most effective way to raise the needed capital is to convert non-state funds into capital for tourism development. There are currently more than Rmb100 billion un-invested funds in the form of idle bank deposits in Sichuan. Holders of these funds hope to find an investment vehicle that is safe and can provide stable returns – requirements that can be met by the tourism industry. Sichuan can convert these non-state funds into capital for tourism development by issuing tourism bonds, setting up non-state privately solicited funds, and establishing stockholding and cooperative companies for tourism development. In the Mainland, there are quite a number of success stories of non-state investment into the tourism sector. With the participation of various forms of capital from the non-state sector, tourism in Sichuan can expect to flourish again.


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3. The eight Pan-PRD provinces/region possess a lot of high-quality tourism resources.

However, as they lack experience in designing and constructing tourism properties, projects and entertainment facilities, and have not developed international strategies and views, a lot of places with abundant tourism resources are often unable to generate the desired level of economic return. At the operation level, because of low management capability in the eight Pan-PRD provinces/region, facilities in scenic spots are often insufficient to cope with a rise in the number of tourists, and accommodation capacity and service quality of hotels and guest houses are unable to meet the needs of tourists. This has led to the undesirable situation of shorter stays and lower spending by tourists. Hong Kong possesses world-class talents and professionals in the fields of landscape design and tourism development, their extensive experience in the management and operation of large-scale projects can be used to help the region upgrade the standards of development of tourism resources, construction of tourism properties, as well as design, construction and management of special tourism projects. These not only offer good opportunities for Hong Kong to participate in the Mainland’s economic development, but could also usher in a new round of prosperity for Hong Kong’s tourism industry.

4. Because of the overlap between public administration and enterprise management, and

the lack of operating efficiency, the Pan-PRD tourism sector is confronted with problems such as low awareness, lack of interest, narrowing funding channels when promoting investment and attracting capital. With insufficient capital injection, a lot of the region’s tourism resources are not fully utilised or scientifically developed, and have gradually lost their ability for sustained development. Hong Kong possesses extensive experience and advantages in raising funds, and can coordinate to meet the funding needs of the Pan-PRD tourism industry. Through the use of financing methods such as build-operate-transfer (BOT) to bring in foreign capital, Hong Kong enterprises can provide the Pan-PRD with funding schemes and channels for financing tourism development. From an objective point of view, BOT projects, which are invested and operated by private companies, would strengthen management of the projects, increase efficiency and usher in advanced technology and management experience from overseas. If Hong Kong enterprises enter the Pan-PRD tourism industry by participating in operation, then finding means to better run these newly developed projects would become crucial. These enterprises may cooperate with travel agencies in the Mainland and Hong Kong to actively develop tour routes visiting these newly developed projects, and leverage on Hong Kong’s position as an international tourism city and its strengths in tourism marketing to rapidly promote these newly developed tourism projects in the overseas markets.


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5. Although the Mainland is rich in tourism resources and enjoys a vast market that is attractive to Hong Kong’s travel agencies, Hong Kong’s tourism industry believes that a number of obstacles still need to be removed for Hong Kong travel agencies to enter the Mainland market. Most significantly, Hong Kong enterprises setting up travel agencies in the Mainland are confined to receiving inbound international tourists, and are not able to provide outbound travel services to domestic tourists. As it is difficult to compete with Mainland travel agencies in providing inbound travel services and the corresponding profit margin is not big, Hong Kong travel agencies have little interest in developing their businesses in the Mainland. Those in the industry suggest that Hong Kong’s strength and advantage are in developing outbound travel service; they wish to take part in the enormous business of organising outbound travelling for the 450 million Mainland residents in the Pan-PRD region.


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II. TOPICAL ANALYSIS

“Pan-PRD Tourism Cooperation: Opportunities for Hong Kong”

Part Two: South-western Region

Guangxi Expands Tourism Cooperation with ASEAN Countries -------- 10

Yunnan Spurs Tourism Development ------------------------------------------- 14

Guizhou to Overcome the Dilemma of Having First Class Resources but Sub-standard Development------------------------------------------------------- 19

Non-State Capital Entering Sichuan’s Tourism Industry--------------------- 23

Opportunities and Obstacles Faced by Hong Kong When Developing Tourism Businesses in the Pan-PRD -------------------------------------------- 27

Hong Kong Can Participate in Pan-PRD Tourism Development and Construction Projects -------------------------------------------------------------- 31


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Guangxi Expands Tourism Cooperation with ASEAN Countries

Guangxi is adjoined to ASEAN countries. They not only share similar climate but are also fairly alike in humanities, customs and traditions. As the third largest origin of overseas Chinese, Guangxi is the hometown of a lot of overseas Chinese in Southeast Asia. This is why the ASEAN counties have become an important source of tourists for the autonomous region. In the first half of 2004, visitors from these countries accounted for 30% of the total 450,000 visitor arrivals in Guangxi, and the trend is still going up. Vietnam, Malaysia, Thailand and Indonesia have continuously ranked among the top ten sources of tourists for Guangxi for a number of years. The percentage increase of visitor arrivals into Guangxi from these countries has reached double-digit. Currently, the ASEAN countries account for a third of its tourism economy, with an annual revenue exceeding Rmb1 billion. Increased tourism cooperation between Guangxi and ASEAN

As the construction of China-ASEAN Free Trade Area is accelerated and Guangxi has been designated the permanent venue for the annually held China-ASEAN Expo, the autonomous region naturally assumes a frontline role in the China-ASEAN Free Trade Area. External factors bring about new opportunities and increase room for the region’s international development, and tourism will among the industries with the greatest development potential amidst increased economic cooperation between Guangxi and ASEAN. On the eve of the first China-ASEAN Expo held on October 28, 2004, the first China (Guangxi)–ASEAN International Tourism Cooperation Forum was held in Nanning, the capital of Guangxi. More than 20 renowned tourism experts and scholars from ASEAN and China attended the forum at which participants discussed tourism cooperation between China and ASEAN, border tourism between China and ASEAN, as well as issues related to Guangxi-ASEAN cooperation in the areas of transportation, information, tourism liberalisation, crisis management, advertising and promotion, and human resources development. The objective of the forum was to expand the influence of Guangxi on ASEAN countries, turning Guangxi into a tourism platform for China and ASEAN.

At present, the regular flights between Guangxi and ASEAN countries are confined to the routes of Nanning- Hanoi, Nanning-Bangkok, Guilin-Singapore, Guilin-Kuala Lumpur, and Beihai-Vinh Ha Long. Experts attending the forum suggested that the number of flights should be increased in the future. In addition, Ms. Chen Qixian, Vice Director-General of Guangxi Tourism Bureau, hopes Guangxi and the ASEAN countries would cooperate to simplify visa procedures, share tourism resources and adopt relevant measures to provide more convenient tourism services. Tourism experts from the ASEAN countries indicated that it is their desire to enable “national border-free travel and tour” between China and ASEAN, and they are striving to adopt measures that will help make this possible. For example, the Tourism Bureau of Malaysia has amended their immigration regulations, allowing tourists to apply for visa via the internet, and the validity of the visa has been


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extended to 30 days from the previous 14 days.

During the China-ASEAN Expo held on November 3, 2004, the tourism industry of Guangxi hosted a number of promotion activities, and business contracts were successfully secured. In all, 28 investment and project development contracts were signed, involving a total investment amount of Rmb6.985 billion. Of these, 15 were domestic-funded projects which involved a total investment of Rmb1.994 billion and 13 were foreign-funded valuing Rmb601 million. These projects are located in Nanjing, Guilin, Beihai, Baise, Hechi, Guigang, Hezhou, Qinzhou and Yulin; and involve projects such as the development of tourism resources and scenic spots, tourist resorts, hotels, eco-farm tours and construction of tourism facilities. These investment and construction projects will lay a solid foundation for the sustainable development of tourism of Guangxi. China-Vietnam border tourism is taking shape

Among the ASEAN countries, Vietnam has developed closest relationship with Guangxi in the area of tourism. From January to September 2004, visitor arrivals from Vietnam to Guangxi totalled 87,000, equivalent to 43.7% and ranking the highest among the 10 ASEAN countries1. Among the seven immigration points that Vietnam has opened to tourists from the Mainland, six of them border Guangxi. Along the 1,020-kilometre Guangxi-Vietnam border, there are more than 100 natural and historic scenic spots and places of interest, blessed with abundant tourism resources, such as Asia’s largest and the world’s second largest cross-nation waterfall -- Detian Waterfalls Clusters; one of China’s nine most famous passes -- Friendship Pass; a border city touted as “Small Hong Kong” -- Dongxing City; and “Guilin on the Sea” – Vietnam’s Ha Long Bay. By now, China-Vietnam border tourism has taken initial shape. There are now a total of 96 Mainland travel agencies engaging in related businesses; together they employ a total of 29,000 staff.

A direct effect of the development of China-Vietnam border tourism is its contribution

to the coffers of local governments at the border areas. According to statistics, border tourism has become one of the pillar industries of Dongxing City, which overlooks Mang Street of Vietnam across the river. In 2002, the city’s tourism industry generated an output value of Rmb210 million, accounting for 15% of GDP. The tourism industry directly or indirectly contributed 30% or more than Rmb2,500 to Dongxing residents’ per capita income of Rmb8,690. The tourism industry at Congzuo City, which boasts of famous tourism resources at the border such as the Detian Waterfalls Cluster and the Friendship Pass, has also evolved into one of the city’s pillar industries. In 2003, Congzuo City recorded 42,500 overseas tourist arrivals and earned US$6.142 million in foreign exchange. At the Congzuo Guangxi (Detian) International Border Tourism Festival held on September 26, 2004, the city arranged for its counties and urban districts to present their projects to prospective investors.

1 The 10 ASEAN countries include: Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines,

Singapore, Thailand and Vietnam.


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Over 100 projects were introduced during the event and 23 of them secured investment contracts, involving a total value of Rmb1.132 billion. Among these, 12 contracts involving an investment amount of Rmb80 million were signed with the County Government of Daxin.

Detian Waterfalls and Friendship Pass Detian Waterfalls is located at the Guangxi border in Daxin County, Congzuo City. It is neighbouring to Vietnam’s Ban Gioc Waterfalls, separated by Guichun River. The annual average flow of water at Detian Waterfalls is three times that of Huangguoshu Waterfalls in Guizhou. Detian Waterfalls is over 200 metres wide, 70 metres high and 60 metres deep. The waterfalls in three vertical drops from the cliff, sounding like that created by thousands of galloping horses. The grandeur of the scenery could be felt whether viewed up closely from a bamboo raft or watched from a distance. The Friendship Pass is located at the Guangxi border of Pingxiang City and was previously called the “Zhennan Pass”, known for being the venue of the Sino-French Battle during the Qing Dynasty. In the 1950s, it was renamed to commemorate the friendship established between China and Vietnam. Although there are no special scenic spots in its periphery, the Friendship Pass is the starting point for touring into many of the famous border tourist spots. As the former Zhennan Pass was the venue of many battles, numerous war ruins remain in sight, the most famous of which is the Xiaolian City of Longzhou, which is located to the north of Pingxiang City.

Regarding the market position and the role of China-Vietnam border tourism, Mr. Chen

Daxing, Associate Chief of the Market Development Section of Guangxi Tourism Bureau, pointed out that border tourism is an important segment of tourism from the narrow perspective of Guangxi and Vietnam. From a wider perspective of regional interaction, it serves as an important bridge for linking China and the ASEAN countries. According to the statistics of Guangxi Tourism Bureau, visitors touring Guangxi borders come from all the 31 Mainland provinces, autonomous municipalities and regions, the number of visitor arrivals from both China and Vietnam recorded passing through the Guangxi borders reached 2.9652 million in 2003, of which 512,100 joined tours arranged by travel agencies. According to the External Relations Chief of Vietnam National Administration of Tourism, Mr. Wu Shiping, Vietnam recently announced that from September 12, 2004, Mainland tour groups only need to have a special permit to enter the six northern provinces of Vietnam via highway, railway or international ports; neither visas nor passports will be required. Meanwhile, these tour groups will be allowed free entry and exit at seven existing border ports. Maximise border tourism resources

Although border tourism is developing steadily, visitor arrivals joining border tours in Guangxi account for only 1% of the total visitor arrivals into the autonomous region. This


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reflects that the current development of border tourism does not commensurate the region’s abundance in border tourism resources. Mr. Qiu Dong, Party Secretary of Daxing County of Congzuo City, pointed out that an important cause of inadequate development of border tourism is its lack of communication and cooperation with the Vietnamese side to enhance development of scenic spots and key tourist destinations at the borders and its periphery, which has led to a lack of tourism items and content. Mr. Chen, Section Chief of Guangxi Tourism Bureau, deems that the most urgent task now is to further consolidate tourism resources and develop new tourism products including planning and launching new tour routes. Meanwhile, priority should be given to marketing these tourism resources outside the region. In recent years, scenic spots such as the landscapes of Guilin and the silver beaches in Beihai are facing promising market prospects, thanks to large-scale and intensive marketing efforts. Successful marketing would include the promotion of local tourism resources as well as tour routes around the periphery which are developed as a result of consolidation of tourism resources. This way, the integrated tourist destination of China-Vietnam borders would become a unique feature and its resources would be maximised. The tourism sector of Hong Kong is well experienced in the design of tourism routes and promotion of tourism resources, capable of complementing Guangxi’s efforts in developing border tourism. Business opportunities herewith are worth noting by Hong Kong businesses.

China and Vietnam need to step up efforts to regulate the markets for border tourism,

penalising fraud and illegal acts in the tourism industry to safeguard the reputation of their scenic spots and maintain market order. To prevent frauds in retail shops, Guangxi Tourism Bureau and the tourism authorities of Hanoi, Hai Phong and Ha Long Bay in Vietnam have exchanged notes on the measures they adopt on preventing frauds. In addition, the tourism authorities decided to set up public notices at border ports to warn tourists of the possible fraudulent activities and behaviours that they may encounter during their tours. At the same time, travel agencies are asked to remind members of their tour groups of the matters to which they need to pay special attention. The standard “Guide for Tourists” and “Form for Feedback on Tourism Service Quality” should be supplemented to the materials that travel agencies distribute to members of their tour groups. These measures will help tourists better understand the purpose of their tour expenses, and prevent them from being cheated. As individual travellers who are merged into tour groups are most vulnerable to frauds, the authorities have designated one travel agency in each of the cities of Nanning, Beihai, Fangchenggang and Congzuo to serve individual travellers. These travel agencies have developed extensive China-Vietnam border tourism businesses and possess good reputation. These measures are adopted to protect the interests of the tourists and create a safe, orderly, and high-quality environment for China-Vietnam border tourists.


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Yunnan Spurs Tourism Development

Owing to the unique features of Yunnan’s climate and geographical location, its numerous ethnic groups, its ancient history and rich culture, Yunnan is gifted with abundant tourism resources. Among the province’s well-known tourist destinations and key national scenic spots are Lunan Stone Forest, Dali, Xishuangbanna, Three Parallel Rivers, Dianchi Lake in Kunming and Yulong Snow Mountain in Lijiang, etc. In addition, Yunnan has 47 provincial-level scenic spots. In 2003, the tourism revenue of Yunnan exceeded Rmb30.6 billion, representing 12% of the province’s GDP. Directly and indirectly, the tourism industry employs 1.64 million persons. According to statistics, from January to September 2004, the Province received 45 million domestic tourists, up 22% from the previous year, and 2.1935 million overseas tourists, 31.3% more than the previous year. US$281 million of foreign exchange income was generated, representing a 37.6% growth over the previous year. Yunnan’s total tourism revenue in the nine-month period reached Rmb25.017 billion, representing a 19.1% increase over the same period in the previous year.

Six aspects need to be reformed as soon as possible

On July 28, 2004, Yunnan’s Party Committee and Provincial Government promulgated a

set of “Suggestions to Speed up Tourism Development”, outlining the overall objectives of tourism development. These objectives included a double-digit growth pace in the output value of tourism industry between 2004 and 2020. By 2005, overseas visitor arrivals would reach 1.5 million and generate foreign exchange revenues of US$510 million; while domestic visitor arrivals would reach 60 million and generate tourism revenues of Rmb32 billion. Together, these will amount to a total of Rmb36 billion in tourism revenues for the province. By 2010, Yunnan targets overseas visitor arrivals to reach 3 million and generate foreign exchange revenues of US$1.2 billion; while domestic visitor arrivals would reach 75 million and generate Rmb52 billion of tourism revenues. In total, Rmb62 billion of tourism revenues would be generated in 2010, doubling the sum recorded in 2003. By 2020, total tourism revenue is targeted to reach Rmb150 billion, doubling that of 2010. As cited in the “Suggestions”, the six areas that need to be reformed as soon as possible include:

1. Mode of tourism development – the existing “government-controlled” mode should be

gradually reformed into a “government-regulated but market-led” development mode. Industry guidance and macro-control should be strengthened, while maximising market-led resource allocation, and aggressively encouraging various social sectors to take part in the development of the tourism industry.

2. Tourism growth – the existing “quantity-focused” growth model should be reformed to “quality- and efficiency-focused” growth model. Continuous efforts should be made to optimise the mix of products, sources of tourists, human resources, as well as the structure of enterprises and their distribution in the region. The quality of the tourism


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industry should be fully upgraded to achieve efficiency and coordinated development of economy, society and ecology.

3. Tourism development and construction – the “extensive” development and construction

mode should be reformed into an “intensive” one. Yunnan should leverage on large-scale projects to upgrade tourism products, enhance the cultural contents of tourism items, increase their scientific content and nurture a specialty brand name for its tourism industry.

4. Product mix – product development focus should be shifted from “sight-seeing” tours to

“sight-seeing and vacationing” tours. Yunnan should spur development of leisure and entertainment holiday packages, business and conferences packages, as well as other new products such as cultural, ecological and farm tour packages.

5. Enterprise distribution – the existing industry structure, which is dominated by dispersed

distribution of a large number of small-scale, weak and poorly-performing tourism enterprises, should be reformed. These enterprises should be consolidated to form enterprises of larger scale. The reform of tourism enterprises should be deepened to create an industry structure which has general tourism service providers and regional business groups acting as industry leaders, and specialised and professional enterprises playing supporting roles. Enterprises should be encouraged to adopt network and chain-store type of operations.

6. Style of tourism management – the existing management style which is dominated by

administrative control should be transformed into one that is guided by laws and regulations. In accordance with the rules of a socialist market economy, a modern tourism management system with macro-control directions set by the government, self-regulated industry, and independently operated enterprises should be gradually developed.

Separate government administration from enterprise management and strengthen cooperation with domestic and foreign parties

To successfully transform the industry’s development mode from being

“government-controlled” to one that is “government-regulated but market-led”, the “Suggestions” proposed accelerating the reform of the state-owned tourism enterprises and separating the functions of government administration from those of enterprise management. The asset structure of all state-owned or state-held hotels and travel agencies shall be reformed; restructuring, sales and auction of shareholdings, leasing, sub-contracting and other forms of cooperation with non-state organisations and individuals in accordance with the standards set for tourism projects development, construction and operation will be encouraged to speed up the reform process. Centralised planning and comprehensive


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development of scenic spots by large enterprises which have obtained the respective development and operating rights will be encouraged.

The “Suggestions” also proposed further opening up to domestic and foreign investors

to speed up tourism enterprise development. The strategies of “attracting foreign investment” and “developing overseas business” will be adopted at the same time. Developed enterprises beyond the province and even those from other countries will be encouraged to participate in Yunnan’s tourism business by direct investment, merger and acquisition, or relocation of headquarters. These travel agencies will be accorded treatments similar to Yunnan’s local travel agencies. A travel agency registered in Yunnan with an annual turnover of Rmb30 million and receiving at least 5,000 tourists a year, without record of serious misconducts, and has been operating in Yunnan for a minimum of three years, will be exempted from paying deposits when it opens its 11th branch in the province. Efforts will also be stepped up to promote investment in tourism projects that have promising market prospects and exhibit good development potential, and to aggressively attract external funds to partake in the development of tourism resources and construction of basic tourism facilities. Hong Kong businesses with extensive experience and comparative advantages in raising capital can play a meaningful role in meeting Yunnan’s financing need to develop its tourism industry.

A new theme “Vibrant Yunnan -- A Heaven for Tourists” has been launched

To turn Yunnan into an internationally renowned, first-class tourist destination in China,

and provide domestic and overseas tourists with high-quality and unique tourism products, Yunnan’s Vice Governor Shao Qiwei announced at the China International Tourism Fair held in Shanghai on November 25, 2004, that the Province has launched a new theme for tourism development, ”Vibrant Yunnan -- A Heaven for Tourists”. The major features of this theme include:

1. Launching new products

While continuing to develop its leading tourist attractions such as the world-renowned Stone Forest, Lijiang, Dali, Xishuangbanna and Shangri-La, Yunnan will give priority to the development of six integrated tour routes: Greater Kunming Holiday Tour in central Yunnan; Shangri-La Ecological and Cultural Tour in north-western Yunnan, Karsts Landscape and Cultural Tour and China-Vietnam Border Tour in south-eastern Yunnan; Tour of Exotic Sceneries and Volcano at the western Yunnan-Myanmar border; Cross-border and Tropical Rain Forest Tour in south-western Yunnan; and Cross-border, Historic and Cultural Tour in north-eastern Yunnan.


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2. Heighten tourism by hosting activities monthly While continuing to host the China International Tourism Fair and the China Kunming

International Cultural Tourism Festival, Yunnan will also upgrade the status of other tourism-related events such as the China (Yunnan) International Flower Festival, China Yunnan Open Golf Tournament for International Celebrities, and China Yunnan International Ethnic Costumes Expo. It will also organise and improve the standards of other large-scale programs, festivals and exhibitions, so that activities are scheduled to take place in Yunnan each month, and tourism activities will heighten every other month.

3. Improve the tourism environment by upgrading infrastructure facilities

Based on the existing tourism facilities for dining, accommodation, transportation,

travel, shopping and entertainment, Yunnan will focus on improving and upgrading the transportation conditions for tourists, designing and constructing a series of conveniently located holiday resorts, guest houses and hotels. In aviation, in addition to the existing 10 airports, Yunnan will speed up the construction of new airports in Wenshan, Honghe and Tengchong. In railways, Yunnan will lobby for the construction of the railway linking Dali, Lijiang and the Yunnan Section of Pan-Asia Railway Network. In highways, Yunnan will promote the construction of top-class highways and highways that provide better access to scenic spots. In waterways, Yunnan will launch the golden international tour routes along the Lancangjiang River and Mekong River as soon as possible.

4. Encourage overseas travel agencies to arrange Yunnan tours

To encourage tourism administrative departments and industry associations to develop

the tourist source markets, Yunnan will implement in 2005 the “Interim Procedures for Publicising and Promoting Yunnan Tourism”. Simultaneously, Yunnan will adopt a reward system to encourage the development of overseas markets by implementing a set of “Trial Procedures of Yunnan for Rewarding Overseas Tourism Promotion”. Under this arrangement, the government will set up a special fund for awarding prizes to travel agencies that aggressively cultivate overseas tourist source market, and that organise tour groups by charter flights, train and self-driven vehicles. The Provincial Government will also reward overseas travel agencies that frequently aggressively promote Yunnan to tourists, and contribute to the development of Yunnan’s tourism industry. These measures are aimed at encouraging overseas travel agencies to organize more tour groups to Yunnan.

Someone related to the industry pointed out that Yunnan will give priority to revitalising

the overseas tourism market. Yunnan is currently upgrading its traditional tour routes, and at the same time, launching new ones to attract overseas tourists. As the construction of China-ASEAN Free Trade Area is speeding up, Yunnan Province is taking full advantage of Lancangjiang River-Mekong River tourism cooperation to actively expand its tourist source


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markets in the southeast Asia. It is also striving to attract tourists from Non-ASEAN countries into Yunnan, aiming to forge a closely-knitted tourism ring with countries such as Singapore, Malaysia, Thailand, Vietnam, Laos, Myanmar and Cambodia. Meanwhile, Yunnan is also stepping up development of tourist source markets in Japan, South Korea, Europe and America, Australia and countries in south Asia such as India and Bangladesh, to forge tourism alliances with these regions. Complemented with various measures, Yunnan’s tourism industry is expected to show promising prospects.


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Guizhou to Overcome the Dilemma of Having First Class Resources but Sub-standard Development

Touted as a “big nature park”, Guizhou possesses the third largest number of National

Scenic Spots in China. There are 12 world-renowned tourist destinations including Huangguoshu Great Waterfalls, Dragon Palace, Zhijin Cave, Red Maple Lake, Wuyang River and Malinghe Valley. The province boasts of abundant tourism resources such as the spectacular Karst landform, virgin natural environment, historic and vibrant culture, rich ethnic customs, among others. Guizhou tourism offers a collection of scenic panorama of nature, views of humanities and culture, as well as tastes of ethnic minority customs. These, coupled with a comfortable climate that is free from both extremely harsh winters and very hot summers, make the province an ideal sight-seeing destination and summer resort for tourists. In 2003, the tourism revenue of Guizhou was Rmb11.675 billion, accounting for 8.6% of its GDP. From January to August 2004, the province received a total of 120,000 overseas tourists, generating US$42.18 million in foreign exchange earnings. It also received 16.26 million domestic tourists, generating Rmb7.37 billion in domestic tourism revenue. Guizhou thus recorded total tourism income of Rmb7.714 billion during the period, representing 60.5% increase over the same period in the previous year.

Lagging development of scenic spots

Although Guizhou enjoys abundant tourism resources, the development standards of its

scenic spots still lag behind. In Kaiyang County, for instance, the Zijiangdifeng, which is reputed for its Karst landform, has been closed to tourists for two years because it has not yet restored the pedestrian path that was destroyed by floods in 2002. This scenic spot, in the opinion of experts, has spectacular views of grotesque rock formations, and the scenic views in the land cracks along the Zijiang River are regarded as rare wonders with much potential for tourism development. However, neither the group of local farmers who originally intended to develop the vicinity, nor the current commercial developers have succeeded in re-launching these sceneries in the market. According to the statistics of Kaiyang County, from 1999 to the present, Zijiangdifeng has only one 10-kilometre pedestrian path in place, and supplementary facilities and services such as viewing decks, rest areas and convenience shops have not been constructed.

Such sub-standard development is not only confined to Zijiangdifeng. According to

Mr. Yao Jiahong, Director-General of Kaiyang County’s Tourism Bureau, the three major National Scenic Spots of Guizhou all lag behind in tourism resources development. Although two other scenic spots that match the fame of Zijiangdifeng, namely, Kaiyang Nanjiang Canyon Park and Xianghuo Rock Gouge Tourist Area, were developed even earlier, their development standards are neither satisfactory. Restaurants in Xianghuo Rock Gouge Tourist Area have not been restored since they were destroyed by the floods in 2002. Although this area has the best paved pedestrian path in the province, they are not


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complemented with necessary service facilities. Tourists are not able to locate any path signs, rest areas, nor stores along the 10-kilometre tour path in the scenic spot. Accommodations in Kaiyang Nanjiang Canyon Park are worn out and poorly maintained; the bridge over the plank road has not been repaired in years. The passiveness and lack of financial strength of developers have become hindrances to tourism development.

A main reason for the sub-standard development of tourism resources in Kaiyang

County is a lack of requirements in the transfer of management and operating rights of the scenic spots. As the threshold set for investors is too low, some scenic spot developers do not have adequate capital for investment, nor any concrete plans and targets for development. They just hold onto their developing and operating rights, and passively wait for the government to inject funds so they could readily reap the benefits. Such a phenomenon is not confined to Kaiyang. In the south-eastern and southern parts of Guizhou, some developers that have been awarded rights to develop and operate National Scenic Spots only care about making money from sales of entrance tickets and taking up more land around the scenic spot, waiting for opportunities to enhance their profits by selling these lots to interested buyers. Some tourism experts have pointed out that if these bottlenecks causing sub-standard development of the province’s scenic spot are not overcome, the overall and sustainable development of Guizhou’s tourism industry will be seriously hampered.

Tourism infrastructure facilities need improvement

Apart from sub-standard development of Guizhou’s scenic spots, some external factors

are also restraining the development of tourism in Guizhou. Taking the Huangguoshu Waterfalls Scenic Area in Anshun as an example, people from the industry pointed out that if the area were to receive more than 2 million tourists a year, more than half of these tourists would be visitors travelling in tour groups. This means the scenic spot would be receiving more than 2,700 group tourists daily, and it would require more than 90 buses to take these tourists from Guiyang to the Huangguoshu Scenic Spot. However, there are currently only 350 buses that have seating capacity of 30 persons or over in Guiyang. Given that over 80% of the travel agencies in Guizhou are operating more than 10 other tour routes aside from the route to Huangguoshu Waterfalls, it would be too difficult for the Guiyang City to supply more than 90 buses daily to transport tourists to the scenic spot. Besides, the Huangguoshu Waterfalls Scenic Spot does not even have enough parking spaces to accommodate all these buses.

Shortage in rooms for accommodating tourists is another pressing issue faced by the

industry. Tourism resources in the city of Anshun account for over 10% of the city’s land area. The city boasts more than 150 scenic spots that are of city-level and above. Visitors of the Huangguoshu Waterfalls often want to tour other scenic spots in the surrounding areas. However, as there are only 12 two- and three-star hotels in Anshun City with a total accommodation capacity of 2,000 guests per day, there is little room left for accommodating


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tour groups after receiving guests attending conferences and tourists visiting relatives in the city. Local hotels would not actually have the capacity to meet the demand for accommodation arising from a daily average of 2,700 visitors to Huangguoshu Waterfalls. On the first two days of November 2004, Huangguoshu Waterfalls Scenic Area received two special tour groups of 400-plus and 700-plus visitors respectively. Quite a number of these tourists would have preferred to spend a night in Anshun, but no hotel in the city has enough capacity to accommodate all these tourists.

The Standards for Rating Two- and Three-Star Hotel According to “China’s Standards for Rating Star Hotels”, two-star hotels are required to have at least 20 guestrooms. Their guestrooms should be furnished, with 95% of the rooms having private washroom and 16-hour supply of hot and cold water. On dining facilities, two-star hotels need only to have places that serve breakfasts. They should also have shops, postal and telecommunication services, and hairdressing parlour. Three-star hotels are required to have reasonably-decorated guestrooms, all of them with private washroom, 24-hour supply of hot and cold water, completely furnished with air-conditioner, direct dial telephone, and television set. They should have different dining facilities serving both Chinese and Western cuisine, bars, and coffee shops. Other facilities such as beauty parlour, rooms for meetings and conferences, recreation facilities as well as work-out facilities. There are a large number of these hotels. Because they offer up-to-standard services, charge moderate prices, they are internationally popular and largely favoured by tourists.

Tourism products need upgrading

Regarding the tourism products, sightseeing tours are the major items for Guizhou’s

tourism industry. As organising sightseeing tours is a simple service, commonly involving only “buying entrance tickets, round-trip bus rides and picture taking”, the length of stay of tourists is usually short, and consumption on shopping and entertainment-related expenses are low. This phenomenon cuts short the chain of tourism services that Guizhou could provide, limiting the industry’s potential to create higher value-added, and impeding the development potential of tourism in Guizhou. In addition, as sales of tickets to scenic spots are currently the major source of income for Guizhou’s tourism industry, the province could only increase its revenue by hiking the prices charged on entrance tickets, which would raise the cost of tourist tickets. Compared with other scenic spots inside and outside China, the cost for organising group tourists to Guizhou is not cheap at all. Arranging a Beijing tour group to visit Guizhou along the western tour route for example would entail higher charges than taking the tour group to Thailand or South Korea, dampening the competitiveness of Guizhou in both local and overseas tourism markets. Having visited a number of scenic spots in Guizhou, some tourists provided feed back that the quality of the scenic spots are not worth


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the prices they charge, which is one of the factors causing slow growth in visitor arrivals in Guizhou.

To enhance the value-added and competitiveness of Guizhou’s tourism industry, the

traditional sightseeing tours need to be reformed and upgraded. To be able to attract more tourists to Guizhou, more cultural and scientific contents should be added to these tours to raise their standards. In November 2003, Guizhou adopted and implemented an “Overall Tourism Development Plan of Guizhou”. The “Plan” set down the short-, medium- and long-term objectives of tourism development. On the basis of gaining better understanding on natural and cultural resources, the “Plan” proposed a diversified product development strategy which gives priority to launching environmental tours, eco-tours, cultural tours, resort holidays, as well as tours that would provide guests with real village life experiences.

The “Plan” outlined 12 major tourist areas: general tourist areas including Guiyang,

Anshun, Kaili-Zhenyuan, Liping-Congjiang-Rongjiang, Lipo, Xingyi-Anlong; and unique and characteristic tourist areas including Fanjing Mountain, Zhunyi, Chishui-Xishui-Renhuai, Zhijin-Qinxi, Weining-Liupanshui, and Wujiang River Valley. According to the “Plan”, Guizhou will strive to develop the inbound tourist markets in Japan, Taiwan, Southeast Asia, South Korea, Europe and the USA. It will also seek to expand the domestic tourist markets in the Yangtze River Delta, Pearl River Delta, Beijing and Tianjin, etc. Guizhou will develop mid- to high-class tourism markets with its countryside tours, eco-tours, cultural tours, educational tours, leisure and resort holiday tours. With more detailed segmentation of the market, Guizhou will give more attention to customized promotion and marketing, aiming to raise the share of tourists with higher spending power.

Progress has currently been made in Guizhou’s development of a characteristic tourism

industry which includes features such as countryside and cultural tours. New types of tourism products, such as Tunbao Cultural Tour, Xishui Sancha River Eco-Tour, Wanfenglin Countryside Tour, Guanling and Pingtang geology exploration tour, etc., have emerged. These products have broken the monotonous pattern of “sight-seeing” tour products, ushering in a trend that encourages development of more comprehensive tour programmes. Travel agencies as well as operators of scenic spots have also begun to shift their traditional methods of introducing and explaining the features of these scenic spots, to injecting more humanities, cultural and ethnic background into the contents of their marketing and promotion materials, hoping that these would help to attract tourists and persuade them to stay longer in the province. As personal experience is an important feature of these emerging tourism products, tourists will spend longer time in the area, leading to a rise in their consumption. The revenues generated by a travel agency in organising one such tour for overseas visitors could exceed the annual revenues generated by some travel agencies solely in arranging sight-seeing tours. Given the current relatively backward state of development, Guizhou’s tourism industry enjoys enormous room for growth, providing reasonable investment opportunities for Hong Kong businesses.


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Non-State Capital Entering Sichuan’s Tourism Industry Boasting of rich tourism resources, Sichuan is not only known for the Jiuzhaigou Valley

Scenic and Historic Interest Area, Huanglong, Grand Buddha of Leshan, and Mount Emei; it also attracts tourists with giant panda tours, Sanxingdui Cultural Relic which is crowned as the treasure of the ancient Shu culture, unique snow mountains and scenic meadows. These diversified tourism resources attract a large number of tourists to Sichuan every year. Sichuan has the second largest number of National Scenic Spots in China, accounting for 15 of the country’s 178 National Scenic Spots. Gifted with abundant resources, Sichuan’s tourism has undergone rapid development, and in recent years, tourism in the province has become one of the fastest growing in China. According to statistics, total tourism revenues of Sichuan have surged from Rmb22.21 billion in 1999 to Rmb42.08 billion in 2003 – the highest among the western provinces. In January-August, 2004, its tourism revenue reached Rmb40 billion, a 79.8% increase over the same period a year ago. During the golden week holiday in the first week of May, Sichuan received 11.23 million tourists, generating Rmb2.87 billion in total revenue, up 44.1% and 77.7% respectively from the same period in the previous year.

Rmb50 billion needed to achieve targets of tourism development

Despite the rapid development in recent years, the scale of Sichuan’s tourism industry

remains relatively small. It has yet to take a higher share in national tourism and its position as a pillar industry of Sichuan has yet to be established. In 2003, Sichuan’s tourism revenue accounted for 7.8% of its GDP, far behind the level indicative of a province’s status as a major tourism economy (15% of GDP). Tourism has not yet developed into a substantial driver of development in the region. According to Mr. Zhang Xuezhong, Secretary of Sichuan’s Party Committee, the Province will strengthen the planning for tourism development and further explore its abundant tourism resources in order to raise its total tourism revenue to Rmb100 billion at the end of 2010, equivalent to 15% of GDP. According to estimates by the Sichuan Committee of Democracy Promotion Party, Rmb50 billion is needed to achieve its tourism development targets in the next 10 years. As such, it needs to explore all available and feasible channels for raising capital to help finance the development of its tourism industry.

Having sufficient capital is the core and foundation of tourism development. However,

the biggest problem confronting tourism enterprises is the difficulty in raising capital. According to a survey, 55.8% of non-state tourism enterprises deemed the shortage of capital as the biggest obstacle to their development. This proportion is much higher than that experienced by other industries. For non-state tourism enterprises, there are but a few fund raising channels available to them. Results of the survey revealed that 64.3% of the capital of these enterprises came from bank loans, 33.3% were either internally-generated or raised from non-state organisations, and only 2.4% of the capital was raised through other channels.


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Considering the huge investment required on the tourism development, solely relying on bank loans, government investment, public share listing and private sector loans would not be sufficient. The best and most effective solution to this issue is to attract and encourage large-scale non-state capital to invest in the province’s tourism industry.

Channelling non-state funds into capital for tourism development

A sizeable pool of non-state capital is eagerly searching for investment channels and is

waiting to be tapped. There are more than Rmb100 billion un-invested funds in the form of idle bank deposits in Sichuan. Holders of these funds hope to find an investment vehicle that is safe and can provide stable returns – requirements that can be met by the tourism industry. The profit margins of Sichuan’s tourism enterprises are high, far exceeding those provided by common industrial and commercial investment. Investment made in natural scenic spots involves practically no risk; particularly in scenic spots of higher class -- the higher their class, the higher the return and the lower the investment risk. These aptly meet the requirements of non-state capital for safe and profitable investment vehicles. According to proposals forwarded by the Sichuan Committee of Democracy Promotion Party, the following measures can be adopted to help convert non-state funds into capital for developing the tourism industry:

1. Issue local government bonds for tourism development; introduce a package of tourism

projects for raising capital from the public; take full advantage of the financing role of capital markets; and support key enterprises to issue bonds to finance their development. As a pilot test, the above measures can first be applied to the province’s top five scenic spots.

2. In the non-state sector, set up privately-solicited funds which would act as major investors and financiers of new and emerging scenic spots. China Xifeng Investment Group, for example, is a large investment group with access to broad financing channels and regard tourism projects as one of its main investment areas.

3. Establish a Sichuan Tourism Financing Guarantee Corporation with capital provided by

the Sichuan Provincial Government to solicit investment funds by individuals and enterprises. By providing credit guarantees to small- and medium-sized tourism enterprises, the corporation will help reduce credit risks and help make it easier for tourism enterprises to obtain loans.

4. Regarding the development of tourism resources, loans can be extended via project financing. Borrowers will be required to fund 25% of the project, and the remaining 75% can be funded by bank loans. The following may be used as collateral to secure financing: land use rights, property rights of relevant buildings and structures,


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management rights to develop scenic spots, rights to future incomes from ticket sales and other fee incomes.

5. Launch individual-mandated loan businesses to channel private sector funds into the tourism industry. Individual-mandated lending is different from traditional bank credit. It refers to the case when an individual entrusts a bank to act as intermediary to facilitate his lending of funds to a third-party individual or organisation. Individual-mandated lending can take a number of forms: one-on-one lending, an individual lending to a group of borrowers, or a pool of lenders financing the project of one borrower. In the course of loan processing, the bank provides the necessary information and a platform for communication, coordinates and monitors the deal arrangement process and charges a fee for providing these services. Details and terms of the loan such as interest rates, mode of guarantees will be up to the lender and the borrower to negotiate and determine. In early 2002, the People’s Bank of China allowed China Minsheng Banking Corporation to launch the business of individual-mandated loan. Subsequently, a number of banks in Guangdong, Nanjing, Shanghai and Hangzhou also adopted this form of financing for infrastructure projects, attracting residents to lend out their savings with high returns. The capital raised for each of these project loans reportedly exceeded Rmb100 million.

6. Set up a joint stock company for tourism development and raise capital from the public via the following means, and invite the board of shareholders to take part in the management of the Corporation: a. With the developer providing the site of a scenic spot and the government granting

rights to county land-use, project management and operation, cash and other resources to form the joint stock corporation, attract enterprise as well as individual funds to invest in the development of the scenic spot. Revenues generated from the management of the site of the scenic spot and from services provided in the scenic spot can be used to guarantee a minimum of 10% return to minority shareholders. When the return rate falls short of 10%, the gap will be met by revenues from ticket sales. The investment term will be fixed at between 5-10 years and upon expiry, the shares will either be transferred back to the joint stock corporation at original price, or be converted into loans. The developer can raise capital from both home and abroad; and set up a corporation solely for managing a project.

b. The company can either offer an entire project, or offer only the project’s

management and operating rights for tender auction, sale or lease, after it has completed the design and preparatory engineering works. When tendering its project, it can adopt modes such as “build-operate-transfer” (BOT), cooperate with investors, enter into joint-development arrangement with developers and transfer the development and operating rights. Investors can also be mandated to manage and


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operate the project, without having to hold shares, while the company uses the site of the scenic spot to guarantee the rate of return for investors of the project.

c. Upon completion of the planning stage for guesthouses, villas and other facilities for

accommodation, the developer can immediately pre-sell these properties to obtain funds to proceed with the construction of the project. When the construction is finished, the project developer will transfer the asset rights to the property investors, while continuing manage and take charge of the daily operations on their behalf. Profits generated after deducting the cost and fees for management will rightfully belong to the property investors. In addition, property investors will be ensured an investment rate of return of at least 10%; if this is not reached from the operating revenues of the guesthouses and villas, the developer will make up for the discrepancy.

There are a number of successful non-state investments in tourism projects

There are quite a number of success stories of non-state investment into China’s tourism

industry. Throughout the country, many industries such as transportation, communication, finance and urban construction are already raising capital by pooling funds from the public. Available data show that in Zhejiang, six non-state enterprise groups have invested Rmb1 billion each to develop tourism projects. Incomplete statistics show that in the past four years, of the Rmb489 million investments in tourism projects in Maoming of Guangdong Province, Rmb465 million were privately-funded, accounting for 95% of the total.

In Sichuan, non-state enterprises have begun to participate actively in the development

of tourism in Leshan City, one of the famous tourism destinations in China, since the early 1990s. These enterprises took part in the construction of facilities at the Foguang Lake, Bishan Lake and other scenic spots. They are the pioneers of non-state investors into the city’s tourism industry. To date, the injection of non-state capital into Leshan’s tourism industry is close to Rmb200 million. From 2000 to 2004, the city attracted more than Rmb700 million in tourism investment, which involved the development of scenic spots, construction of facilities such as restaurants, hotels and roads.

Meanwhile, the major non-state tourism development projects in Sichuan include the

Rmb2 billion Fairyland Jiuzhaigou Paradise International Resort, and the Rmb1 billion “China’s Dead Sea”. Both projects have attracted a large number of local and overseas tourists since their opening on the National Day Holiday of October 1, 2003. Recently, Shenzhen’s 999 Group and Sichuan’s Mingshan County have reached an agreement wherein the 999 Group will invest Rmb1 billion to develop the Baizhang Lake Scenic Spot which spans an area of more than 7,000 mu (Chinese unit of area equivalent to 1/15 of a hectare). As more and more non-state funds are invested, the development of tourism in Sichuan should enjoy more positive prospects.


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Opportunities and Obstacles Faced by Hong Kong When Developing Tourism Businesses in the Pan-PRD

The eight provinces/region in the Pan-PRD are gifted with abundant tourism resources

and boast of world-renowned places of interest and numerous world cultural and natural heritages. However, constrained by shortage of capital, management, human resources and other factors, a lot of these tourism resources are neither fully nor effectively utilised, and their economic potentials are not sufficiently developed. Hong Kong enjoys comparative advantages in investing and managing tourism services, and is well experienced in this field. This provides Hong Kong and the eight provinces/region with strong complementarities and much room for cooperation in tourism development. At the first Pan-PRD Regional Cooperation and Development Forum held on June 1, 2004, the governments of the eight Pan-PRD provinces/region unanimously proposed to give priority to tourism cooperation between the Mainland and Hong Kong. They also expressed willingness to accord preferential treatment to Hong Kong enterprises, providing them with greater convenience and supporting them to develop tourism businesses in these provinces.

Hong Kong’s key to achieving a breakthrough in Pan-PRD tourism development

When Hong Kong enterprises first participated in the development of the Mainland’s

tourism industry, they were mainly confined to developing tour routes for tour groups. With the implementation of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), Hong Kong enterprises started to enjoy stronger policy support. Under the CEPA framework, Hong Kong travel agencies can set up joint ventures with their counterparts in the Mainland on the condition that the latter is the majority shareholder in the joint venture, and the joint venture company will be allowed to operate anywhere in the Mainland. Hong Kong enterprises can also build, restructure and manage wholly-owned hotels, service apartments and restaurants. Hong Kong companies can also set up wholly-owned consultant engineering companies to provide services in construction design, engineering, urban planning and botanical designs.

As a world-renowned tourism city, Hong Kong has extensive experience in tourism

development, and can complement Pan-PRD’s efforts in developing tourism by actively participating in the development and consolidation of Pan-PRD tourism resources. This is not only a good opportunity for Hong Kong to participate in the development of tourism in the Mainland, but also to help Hong Kong’s tourism industry flourish again. Hong Kong enterprises can participate in the development of Pan-PRD tourism via the following ways: 1. Design and Management

The eight Pan-PRD provinces/region possess abundant tourism resources. However,

as they lack experience in designing and building tourism properties, projects and


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entertainment facilities, and have not developed international strategies and views, a lot of places with abundant tourism resources are often unable to generate the desired level of economic return. For instance, some well-known scenic spots with long historical records are unable to maintain their attractiveness to tourists due to underdeveloped facilities. While new scenic spots are being developed, their developments are not compatible with the surrounding area, making the new scenic spots less attractive. Meanwhile, in the course of managing and operating scenic spots, the eight provinces/region in Pan-PRD are still confronted with difficulties, and are unable to achieve sustainable development due to low management capability. For example, the infrastructure construction (including electricity supply, sewage and garbage treatment and water supply and drainage) at some scenic spots is insufficient to meet the demand of tourists. The accommodation capacity of some tourism districts remains low and their quality of service are also unable to meet the requirements of tourists. The attractiveness of these scenic spots to tourists is thus substantially discounted, leading to shorter stays and lower spending by tourists.

Hong Kong has long been reputed as the “Pearl of the Orient”, boasts of world-class

botanical designs, professionals of tourism project development, and extensive experience in large-scale tourism project management. The involvement of Hong Kong enterprises in Pan-PRD tourism will help enhance the development and restructuring of tourism resources, spur the development of tourism-related property projects, as well as upgrade the design, construction and management standards of tourism projects. With its international experience, Hong Kong enterprises can strengthen cooperation and coordination with tourism enterprises in the Pan-PRD to jointly develop characteristic tourism products and a regional tourism brand name. In developing tourism projects, priority should be accorded to the development and planning of scenic spots and places of interest, holiday resorts, natural reserves, theme parks, forestry parks, geological parks, amusement parks, botanical gardens, and other tourism resources that have been designated and planned for development.

At the same time, Hong Kong’s tourism infrastructure enterprises can build world-class

recreation facilities and take part in the design, management and equipment supply to hotel projects. Suppliers of equipment and infrastructure developers can join to form a project team, and cooperate to develop and construct the facilities and provide training when the project is completed. Local tourism enterprises can establish a platform to facilitate the exchange of general consulting services on management of scenic spots and tourism facilities. The platform will help promote professional exchanges between enterprises, government departments and various tourism associations, and facilitate discussion among these parties on issues concerning tourism resource development, sustainable operation and management of tourism facilities. With a platform for sharing these experiences, more can be done to attract tourists into the Pan-PRD.


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2. Financing and promotion As the government’s functions of administrative control and enterprise management are

not clearly delineated, and management and operation remains inefficient, the eight Pan-PRD provinces/region are confronted with problems such as low awareness, lack of interest, and narrow funding channels in promoting investment and attracting capital. Due to insufficient capital, many of the tourism resources have not been fully utilised nor scientifically developed. The traditional tourism products are infrequently rejuvenated, while newly developed products lack distinct characteristics. The common tourism products are unable to find big markets, while those with better potential fail to develop their unique tourism features, thus gradually losing their grip to sustain development. Hong Kong businesses are well–experienced, enjoy a comparative edge in raising capital, and can help tourism enterprises in the Mainland to meet their financing requirements. Via the internationally popular BOT practice Hong Kong enterprises can help provide financing proposals and channels to Pan-PRD’s tourism industry. As BOT projects are invested and operated by private companies, management of the project will be enhanced and their efficiency will be improved. At the same time, state-of-the-art technologies and management techniques can be introduced into the local tourism industry.

If Hong Kong enterprises were to enter the Pan-PRD tourism industry by participating

in the operation, then finding means to better run the newly developed projects would become crucial. On one hand, the enterprises would need to recoup their investment, and on the other hand, the results of the enterprises’ management and operation in these newly developed projects would become a key determinant of their success in cultivating the Mainland tourism market. These enterprises may cooperate with travel agencies in the Mainland and Hong Kong to actively develop tour routes to visit these newly-developed tourism projects, and leverage on Hong Kong’s position as an international tourism city and its strengths in tourism marketing to rapidly promote these newly developed tourism projects in the overseas markets. Infrastructure developers can join the tourism companies in Hong Kong and the Mainland to develop tourism routes related to these new projects. Hong Kong’s status as an international tourism city and its strength in tourism promotion should be leveraged upon; large-scale road shows should be staged to market the newly-developed tourism projects in domestic and overseas markets.

Obstacles faced by Hong Kong travel agencies when entering the Mainland tourism market

Regarding the opportunities available to Hong Kong enterprises to develop the

Pan-PRD tourism market, according to people in the industry, the Mainland tourism is very attractive to Hong Kong travel agencies, as it has both rich resources and a vast market. However, obstacles still remain for Hong Kong travel agencies wishing to enter the Mainland market:


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1. Threshold is set too high

At present, the threshold set for Hong Kong travel agencies is daunting. The annual

business turnover of larger-scale Hong Kong travel agencies is about HK$500 million, but the minimum requirement for setting up operations in the Mainland is set much higher. This makes it difficult for Hong Kong travel agencies to enter the Mainland market.

2. Scope of business is limited

At present, travel agencies set up by the Hong Kong investors in the Mainland are

licensed only to receive and provide guided tour services to inbound tour groups. They are not awarded licences to operate outbound travel services that cater to Mainland tourists. As Hong Kong travel agencies are not in a good position to compete with their Mainland counterparts, and the profit margins of this line of business is relatively small, Hong Kong travel agencies have indicated little interest in developing their Mainland tourism businesses.

Hong Kong’s tourism sector has actually lodged several applications with relevant

government departments including the China National Tourism Administration in the past to appeal for the lifting of restrictions on providing outbound travel services, but to no avail. It is noted that Hong Kong travel agencies have numerous years of international experience, have established strong international networks and linkages, and possess relatively high standards of management and operation. Hong Kong travel agencies are particularly experienced in providing outbound tours, and can provide professional services to Mainland tourists visiting any parts of the world. The problem is that the Mainland authorities are not willing to relax the restriction, making it impossible for Hong Kong travel agencies to enter the market. Hong Kong travel agencies are not keen to provide consulting services on the management and operation to the travel agencies in the Mainland. Such services do not mean much to them. However, Hong Kong travel agencies are willing and ready to assist and support the joint promotion and advertising of Pan-PRD tourism products, and they are interested to cooperate with their Mainland counterparts in this area.

Consolidating the views of the industry, it can be noted that there exist concrete

discrepancies between the existing policies and the actual needs of the industry.


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Hong Kong Can Participate in Pan-PRD Tourism Development and Construction Projects

Hong Kong is an international tourism hub and tourism has developed into one of the

four pillar industries of Hong Kong. After years of development, Hong Kong has developed a number of financially strong and large-scale tourism enterprises. Hong Kong’s tourism industry has accumulated extensive experiences in tourism project management and operation, providing tourism services, as well as market development and promotion services. It is fully capable of supporting the development of tourism in the Pan-PRD and helping these provinces/region to enhance the overall competitiveness of their tourism segments. In the course of doing so, Hong Kong’s tourism enterprises can also expand their businesses in the Mainland. Recently, the eight Pan-PRD provinces/region have embarked on a number of tourism development projects and are inviting investment, a number of which are worth the attention of Hong Kong enterprises:

Fujian

1. Investing in the development of key tourism projects

Fujian Province will give priority to the development of eight tourism brands, including

the Wuyi Mountain World Natural Heritage, Xiamen Gulangyu Scenic Spot, Mazu (Sea Goddess) Culture in Meizhou, Silk Road on the Sea in Quanzhou, Women’s Customs in Hui’an, Traditional Architectures of Fujian, etc. In addition, the Province will include the following projects under its list of key development projects: Fuzhou Ship Culture, Yun Tai Mountain Site, Ningde Baishuiyang Scenic Spot, Red Tour to Long Yan, Taining Great Golden Lake in Taining and the construction of Ancient Cities of Ming and Qing Dynasties. These projects will provide good business opportunities for Hong Kong and will be able to attract capital from Hong Kong to take part in the construction, operation and management these projects.

2. Constructing and operating tourism transportation facilities

Fujian will also accelerate the construction of tourism-related transportation

infrastructure. The Provincial Ministry of the Communication has already included the construction of highway networks linking to Provincial and National Scenic Spots among the priorities for planning, and also lined them up under the annual construction program. Hong Kong businesses can participate in the construction and management of these highways or invest in transportation projects to provide direct train and bus services into the key scenic spots.


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3. Taking part in tourism enterprise reforms In addition, Fujian will actively reform the management systems of tourism projects

across the province. Under the reform, the entire province will share tourism resources, each grade and level will have an independent management system. Mergers and acquisitions as well as investment in the shares of tourism enterprises by non-state and foreign parties will be encouraged. These would help enlarge and strengthen the scale of state tourism enterprises, as well as develop cross-regional and cross-sector tourism enterprise groups. The reform will also attract suitable tourism enterprises from other provinces and even other countries to establish joint venture or wholly-owned travel agencies in Fujian; attract internationally reputed hotel groups to invest and set up their hotel chains in the province, or take part in the management of tourist hotels. All these provide Hong Kong investors with new business opportunities.

Jiangxi

1. Cooperate with Jiangxi Tourism General Company to set up joint ventures to provide

services in inbound travel, domestic travel, tourism businesses, and tourist transport services. Jiangxi Tourism General Corporation is a large business group composed of four international travel agencies, three four- and three-star hotels, tourism businesses, and a tourist transportation company.

2. The Aixi Lake Leisure and Recreation Area, which occupies an area of 2.8 square kilometres. The US$50 million development includes the construction of a Sunny Beach Zone, Fruit Garden Tour, Villa Zone, etc. Ai Xi Lake is located in the eastern suburb of Nanchang City and it boasts of a beautiful landscape and is an ideal destination for leisure holidays.

3. The newly constructed Jiangxi Time Square is a large modern complex integrating office buildings, commercial-residential units, restaurants, health and recreation clubs, and shopping mall together under one roof. It occupies an area of 16,000 square kilometres, with a building area 65,000 square metre, and involves a total investment of US$50 million.

4. Mount Longhushan Tourism Area will be comprehensively developed. The area will consist of the following multi-functional zones: Taoism Culture Expo Zone, Tourism Zone, Business Zone, Entertainment Zone and Hotel and Villa Zone. The project will involve an investment of US$30 million.


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Hunan In order to attract the attention of investors and maximise return, Hunan’s Tourism

Bureau is consolidating the highly dispersed tourism projects, launching three large types of tourism items for investment promotion:

1. Hunan possesses abundant tourism resources including 37 National Level Forest Parks,

Natural Reserves and Scenic Spots and more than 100 Provincial Level Eco-tourism Areas. However, many of them are not yet developed into well-known eco-tourism spots. Mount Langshan and Mount Nanshan in Shaoyang, Mount Huping in Changde, Mount Mangshan in Chenzhou and Mount Shunhuangshan in Yongzhou all enjoy good development prospects. The local government plans to pool a capital of Rmb2.6 billion from interested investors to develop “eco-tourism” in the province.

2. Ethnic customs in western and southern Hunan and cultural relics such as the Liye City, ancient bamboo slips, etc. are valuable tourism resources. The province plans to attract Rmb2.36 billion investment to develop its “humanities and cultural tour” project.

3. Hunan has not yet developed any high-grade or large-scale tourism resort. It plans to invest Rmb1.88 billion to develop a “leisure and holiday tour” project.

Hainan

1. Investing in the development of scenic spots Hainan has 10 excellent bays, more than 180 islands and a large number of planned

scenic spots to be developed. Recently, Hainan is planning to make use of its rich and unique tourism resources and launch a series of key tourism projects for development. The projects being planned include: Shimei Bay, Qizi Bay, Tonggu Bay, Mount Qixianling, Haikou’s version of “the Bund”, and the “Sunny Shores” in Sanya. These large-scale developments, including the Bao’ao project, will need at least Rmb100-500 billion in the next ten years. The Hainan Government hopes to attract more Hong Kong enterprises to co-develop these projects with them.

2. Taking part in the reform of tourism enterprises

Most of the tourism enterprises of Hainan are small in scale and financially weak.

Their main assets are hotels and building structures, and most of them have heavy debt burdens and experience low-levels of liquidity. They have little ability to weather risks. Hainan intends to develop large-scale integrated tourism business groups with large-scale international travel agencies or airlines at the core, supported by travel agencies, hotels, tourist transportation, tour route arrangement, and production and marketing of tourism


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souvenirs. As such, Hong Kong’s large-scale tourism enterprises can consider taking part in the reform of Hainan’s tourism enterprises. 3. Participating in the Tourism Consulting Services

The management and operation of tourism projects in Hainan is rather disorganised,

further regulations need to be introduced to improve market order. In this aspect, Hong Kong may be able to help Hainan by establishing tourism business consultancies. In fact, such companies already exist; the drafting of an “Overall Plan of Hainan Province for Tourism Development” was completed with the participation of Hong Kong’s Shankland Cox Asia Ltd.

Guangxi

Opportunities for Guangxi and Hong Kong to cooperate in tourism development include

a series of projects recently released. Among the list of projects, those which require over US$10 million in investment include Phoenix Tower Scenic Spot at Mount Qingxiu in Nanning, Agricultural Landscape Area in the countryside of Nanning City, Mount Jiudongshan Scenic Spot in Wuming County, development of North Lake Eco-tour in Lingshan County, Longtan National Forest Park in Guiping, Mount Wanggang Scenic Spot in Qinzhou City, and a golf club at Sanniang Bay in Qinzhou City.

Yunnan

Yunnan is currently inviting investors to invest into a series of tourism and cultural

development projects. They include the development of cultural products in Yanjin County, which is crowned as the first stop of the ancient Silk Road entering Yunnan from Sichuan. Yanjin County is a place that integrates the cultures of Zhongyuan (Central China), Jingchu (Central Yangtze), Bashu (Sichuan), and old Yunnan. The historic sites within 10 square kilometres of Dousha Town in Yanjin County possess valuable historical relics, best represented by the ancient and mysteriously suspended coffins of the Bo people; the longest and best-maintained “Wuchi Dao” (a five-feet wide path) constructed during the Qin Dynasty; the repaired and restored ancient castle of Sui Dynasty; Mo Cliff which bears the inscription of Yuan Ci, a well-known poet of the Tang Dynasty; Kwanyin Pavilion which was built atop the Mount Sanchongyanxie towards the end of Ming Dynasty and at the beginning of Qing Dynasty; the delicate Sanguan Tower of Qing Dynasty; the hoof-print stone on the west side of the old wooden city which carries more than 10 deep hoof prints of large stallions; 243 hoof-prints of different sizes at the “Wuchi Path” at Shimen Pass; the four ancient and modern landscape located just in front of the Shimen Pass; the Mo Cliff remains on the Northern Cliff Walls of the “Wuchi Dao” left over from the different ancient time periods; and the iron clock and great drum built during the rein of Emperor Qianlong of the Qing Dynasty. These projects will entail an estimated investment sum of about US$78 million.


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It is forecasted that the ancient city at Dousha Pass will become an attractive tourist destination when the construction of three large hydroelectric power stations at Xiluo Du, Xiangjiaba and Baihetan are completed. When these scenic spots are completed, they will receive 300,000 visitors and generate more than Rmb10 million of revenues annually.

Guizhou

Although Guizhou is a big province in terms of tourism resources, its tourism revenue is

quite small. The potential for developing the tourism resources is hence big, providing business opportunities for Hong Kong business to invest in the tourism industry of Guizhou Province. At present, Tongren City is striving to attract investment capital to develop “a ten-kilometre gallery along the ten-kilometre Jinjiang River”. The Jinjiang River gallery originates from Fanjing Mountain and runs through the whole territory of Tongren City from west to east. There are more than 10 bridges over the Jinjiang River in Tongren City with different shapes, marking the city as a famous “City of Bridges” in Guizhou. The government of Tongren is actively applying to invest in the project with a capital of Rmb150 million, which includes the construction of a ten-kilometre Jinjiang River Scenic Spot and a Nine-Dragon Cave Scenic Spot. It is also striving to step up investment promotion and improve the infrastructure around the scenic spots.

Sichuan

Taking the opportunities arising from the cooperation between Sichuan, Chongqing and

Guizhou in building the “Golden Triangle Scenic Area”, Luzhou City is stepping up investment promotion to raise capital for developing local scenic spots and strengthening infrastructure facilities construction to enhance its capacity to receive and entertain more tourists. The city has planned, packaged and proposed 11 projects involving a total investment of Rmb1.6 billion, and plans to invest Rmb210 million to build three ecological highways running a total length of 338 kilometres, including the Luzhou Section of the Sichuan-Chongqing-Guizhou Tourism Corridor, a Tourist Circular Route in the Fobao Scenic Spot Area, and Tourism Sphere, and a highway linking Gulin, Deyue and Huangjing. These highways will link up the tourist attractions of Hejiang Fobao Scenic Spot with the scenic spots of Simian Mountain of Chongqing, Sidong Trench of Guizhou, and Xingwen Stone Sea and Bamboo Sea of Yibin. A comprehensive, cross-regional and high-quality tourism route will then take shape. The city also plans to use 2 to 3 years’ time starting from 2004, to construct the Luzhou Laojiao Wine Cellar and Luzhou Laojiao Technology Park, turning them into models of industrial tour zones in China. It also plans to make the Luzhou Guiyuan Scenic Spot into a model agricultural tour zone for the country.

Meanwhile, the site of discovery of the world’s first giant panda, Baoxing County of

Sichuan, recently plans to invest Rmb180 million to build a Mount Jiajin Giant Panda


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Eco-Tour Zone. According to the plan, the scenic spot will span 1,200 square kilometres, making it the largest tour zone of its kind in China.


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III. TRENDS & UPDATES ON THE FOUR SOUTH-WESTERN PROVINCES/REGION

Nanning City Strengthens Urban Construction in 2005 ---------------------- 38

Chinese Medicine Industry in Guangxi Attracts Attention ------------------ 40

Yunnan Province Draws in Foreign Capital ----------------------------------- 42

Hekou in Yunnan Bridging Cooperation with Vietnam ---------------------- 44

Guiyang Developing into a Recycling Economy and Ecological City ----- 46

Energy Becomes One of Guizhou’s Pillar Industries ------------------------- 48

Sichuan to Consolidate Preferential Investment Policies Offered by Local Governments -----------------------------------------------------------------------

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Sichuan Asks Financial Institutions to Support Export-oriented Enterprises --------------------------------------------------------------------------

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Memorabilia of Pan-PRD Regional Cooperation ----------------------------- 54


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Nanning City Strengthens Urban Construction in 2005

As Nanning City, the capital of Guangxi, has been designated as the permanent venue of the annual China-ASEAN Expo, the city has set new targets in urban planning to complement its move towards internationalisation. The year 2005 has been set as the first year in strengthening the construction of key towns within the Nanning City. Priority is given to the development of 6 satellite cities

At the Working Conference for the Advancement of Urban Construction held on

December 23, 2004, Nanning proposed to construct a new “urban system for the greater Nanning, which will consist of central city – counties– key towns – and small towns” over the next 6 years. Among the existing 86 towns in the system, six will be transformed into brand-new satellite cities of Nanning City, accelerating their urbanisation. These six key towns include: Dafeng Town of Shanglin County, Chengxiang Town of Wuming County, Luancheng Town and Liujing Town of Hengxian County, and Luwei Town and Litang Town of Binyang County.

In order to accomplish the general target of urban construction, a 3-step plan has been

proposed: (1) Within 2 years, all cities and towns under its jurisdiction will undergo reorganisation of resources to improve the economy, scale of construction, level of urbanisation and quality of infrastructure facilities. In the next 2-3 years, Nanning will upgrade facilities in key towns including streetlights, water supply networks, renovation of old cities, etc.; (2) In the medium term involving about 4 years of construction, the key towns would initially take shape as local economic and cultural centres; (3) In the longer term involving about 6 years of fine-tuning, Chengxiang Town of Wuming County, Luwei Town and Litang Town of Binyang County, and Dafeng Town of Shanglin County, etc. will be built into small cities each with a population between 100,000 and 200,000; Liujing Town and Luancheng Town of Hengxian County, etc. will be built into central towns, each with a population between 30,000 and 50,000. The comprehensive competitiveness of key towns will be enhanced, helping to create a desirable living environment for Nanning residents and promote broad-based construction of Nanning City.

Gradually carrying out urban construction

In the process of urban construction, Nanning has laid down its priorities as follows:

Phase III construction of the Embankment Road Park, the New District of Xiangsi Lake, construction of economic housing, renovation and reconstruction of old cities, improvement of urban facilities and building of road networks. Among these, Phase III construction of Embankment Road Park of Yongjiang River must be completed and be operational by the end of October 2005; 10 roads including Luowen Road and Keli Road will start construction in the New District of Xiangsi Lake, supporting municipal utilities such as supply of water,


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electricity, and telecommunication facilities at the core of the New District should be improved, and efforts should be made so that key projects could start construction and enter into operation as early as possible. 300,000 square metres of economic housing were scheduled for completion in 2004, while another 500,000 square metres will commence construction. In addition, a series of sewage treatment and environmental treatment projects will be launched, including Phase II of the Zuidong Sewage Treatment Plant and Phase I of Jiangnan Sewage Treatment Plant. Nanning will also focus on the construction of supporting facilities for China-ASEAN Expo, completing the Conference and Exhibition Centre and initiating projects such as the China-ASEAN Trade Town, Guangdong Commercial Street, Hong Kong Street, Macao Street, etc.

Invite investment to complement development

Acknowledging that opening up is a necessary path toward building an international metropolis, Nanning has decided to increase investment promotion by 50% over its 2004 level. The city will explore the investor markets of ASEAN, Hong Kong, Macao and Taiwan, Japan and South Korea, etc., consolidate those in the domestic coastal areas of the Yangtze River Delta, the Pearl River Delta, and explore those in the Bohai Economic Rim.

Phase III Construction of the Embankment Road Park and the New District of Xiangsi Lake

Phase III construction of the Embankment Road Park is a key component of Nanning’s urban flood prevention system. Upon completion, it will serve the functions of flood prevention, a wide transportation path, a beautiful scenic spot and a bustling economic front. Nanning City will build the New District of Xiangsi Lake as a bridgehead for the city to connect to other major south-western cities, create a golden brand name for “Xiangsi Lake”, and boost the city’s social and economic growth. With a total area of 127.6 square kilometres, it will be a new district supported with features such as high quality education and high technology industries, integrating science and technology, trade, education, tourism, housing, office, some industries and warehouses. Meanwhile, it will also be an ecological city with superior ecological environment, complete infrastructure and outstanding cultural conditions. The New District possesses abundant water resources and beautiful environment: two water systems -- Xiangsi Lake and Xinwei River -- running through the district from north to south, and the three reservoirs located at the edge of the district -- including Tianbao Reservoir, Luowen Reservoir and Jinshahu Reservoir.


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Chinese Medicine Industry in Guangxi Attracts Attention

Since the 21st century, Chinese herbal medicine has attracted greater attention worldwide, reinstating Chinese and traditional medicines as an emerging industry in the international market. Statistics indicate that the annual sales volume of Chinese herbal medicines has exceeded US$16 billion, growing at an annual rate of 10%-20%. In 2003, China’s exports of herbal medicine and their by-products reached US$690 million; of this sum, traditional Chinese medicinal materials accounted for US$332 million, an increase of 7% over the same period last year. Overseas Chinese account for 42% of the world market for Chinese herbal medicines. Geographically, China’s Chinese herb medicines are mainly exported to Hong Kong, Macao, Taiwan, Thailand, Singapore, Malaysia, Indonesia and other ASEAN countries, as well as to the Chinese communities in USA and Canada. Generally, bright prospects are also seen in Australia, South Korea, Russia, USA, and Canada. Leverage on the Medicine Expo City to highlight the edge of south-western regions in Chinese medicines

Guangxi is one of the major herbal medicine producing areas in the Mainland. It features over 4,600 varieties of Chinese herbal medicine, ranking second in the Mainland. Moreover, Guangxi has a vast sea area gifted with abundant marine medicine resources, and a man-made herb-culturing base which spans an area of 520,000 mu – equivalent to one fifth of the nation’s total. Currently, Guangxi has 28,000 fields growing various types of herbs, and 12 large-scale production bases, which purchase 18,000 tons of raw materials annually. As early as the beginning of 1990s, the Guangxi government has designated Chinese herbal medicine as one of the eight pillar resources of the region. In accordance with the promotion of economic growth in the western region, Guangxi’s industrial and technological development is gaining increasing government support.

In April 2004, Guangxi’s Development and Reform Commission approved the

construction of Nanning ASEAN International Pharmaceutical Expo City (hereinafter referred to as the Expo City), and set its focus on developing Chinese herbal medicine industry to fully utilise the region’s abundant resources. The Expo City is expected to become fully operational by 2006, encompassing industries such as chemicals, bio-pharmaceuticals, food, medical equipment and medical services. In this way, it will become a platform that focuses on the development of medical and pharmaceuticals industries, to provide the largest scale of comprehensive medical services in Asia, with an aim to become an industry leader in China. Adjacent to other major pharmaceutical provinces such as Yunnan and Guizhou, the Expo City’s operation would be conducive to reorganising the Chinese herbal medicine resources in the entire south-western region.

At present, basically every city and county in Guangxi has established Chinese

medicine factories, forming a large enterprises group in the region. The major ones include


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Guilin Sanding Pharmaceutical Group, Guangxi Yulin Pharmaceutical Factory, Guangxi Jinsangzi Co., Ltd., Guangxi Wuzhou Pharmaceutical (Group) Co., Ltd., Guilin Tianhe Pharmaceutical Co., Ltd., etc. These enterprises produce over 650 varieties of patented Chinese medicine and nearly 300 varieties of functional food products, 272 of which have been listed as basic national medicines, accounting for one third of the China’s total. Upon completion, the Expo City will aggressively invite pharmaceutical and related enterprises from both within and outside the region, and encourage them to set up factories in the Expo City. This would help the enterprises develop a sturdy foundation and enhance their competitiveness. To facilitate more frequent exchanges and closer cooperation, standardise management of the industry, and raise the economic, social and ecological benefits of the industry, Guangxi established an Industrial Association of Traditional Chinese Medicinal Materials in December 2004. Approved by the departments of Civil Affairs and Public Health, the Association will promote the use of high technology applications in the industry, protect and reasonably utilise the resources of traditional Chinese medicinal materials in Guangxi.

Hong Kong investors can participate in the development of the Expo City

Situated in Guangxi’s capital Nanning City, the Expo City faces the Southeast Asia, abuts the south-western region, adjoins Guangdong Province, Hong Kong, Macao and Hainan in the east, and connects with the Indian Peninsula. Enjoying unique geological advantages at the China-ASEAN Free Trade Area, the Expo City will facilitate market development in China-ASEAN Free Trade Area. Also worth mentioning is that complementing the policies that encourage the development of pharmaceutical industry, the Guangxi Government has adopted measures that successfully break the monopoly of the state-dominated pharmaceutical industry and the local distribution system. The participation of non-state capital in the pharmaceutical industry has expanded, providing Hong Kong investors with a wider choice of partners. Since as early as year 2000, Hong Kong has intended to develop a traditional Chinese medicine industry. Hong Kong investors may consider establishing some projects on the business platform that Guangxi has begun to construct. Aside from those companies engaging in pharmaceuticals and health food products, Hong Kong investors can also look forward to Nanning’s further opening up of related services sectors to support the operation of the Expo City in 2006. Moreover, Hong Kong investors should also keep an eye on opportunities available in the areas of information, finance, logistics, etc.


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Yunnan Province Draws in Foreign Capital

Yunnan has determined three major strategic objectives featuring a green economy, a rich ethnic culture, and a pivotal point connecting Southeast Asia and South Asia. It has also set eyes on developing five pillar industries, which include tobacco, mining, medicine, tourism, and utilities (water and electricity) development. The provincial government is striving to attract both domestic and overseas investors, especially Hong Kong investors, to explore market opportunities in the province. Yunnan’s comparative advantages and pillar industries

Yunnan has long been reputed as the “south of rosy clouds”. It is known worldwide for its tourist destinations, where over 20 ethnic groups live together with charming historic features and ethnic cultures on display. Aside from tourism resources, Yunnan has also gained strength in its development of a green economy. In tobacco, through vigorous reorganisation of the province’s assets, and after the nine major tobacco factories of the province were merged into 4 large tobacco groups, and the previous 36 brands were reorganised and reduced to less than 20, the market share of Yunnan’s tobacco industry has increased rapidly. Yunnan enjoys abundant Chinese medicine resources, and grows more than 5,000 varieties of natural medicinal materials. “Yunnan Baiyao” is a famous traditional time-honoured brand, and has begun to head for international markets through enhancing technological innovation. In China’s fresh flower market, for every two flowers sold, one is from Yunnan. In exploring overseas market, the province has moved into the flower auction markets of Australia, the Middle East, Europe, and North America. Moreover, there are also immense potentials in water and electricity resources such as Lancangjiang River, as well as pearls and other resources, which can also serve as great attractions to domestic and overseas investors.

Yunnan is currently striving to construct international routes that would connect China with Southeast Asia and South Asia. It is also making continuous progress in the construction of major communications infrastructure projects such as the West Pan Asia Railway and Asia Highway Network. With increasing communication among China and South Asian countries, Yunnan Province will ascertain its role as an irreplaceable land corridor connecting them. Broad areas of investment for Hong Kong Currently, the opening-up and reform progress in Yunnan has entered a new stage, and efforts must be made not only to improve the internal economic development, but also to keep in line with international economy as soon as possible. As such, the Yunnan’s Party Committee and Provincial People’s Government are focusing on utilising foreign capital to speed up the province’s economic construction under the win-win precondition that would


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support mutual development. The year of 2004 marked the first time that the Yunnan Government opened up its electricity sector to external investors. A total of 15 electricity projects were launched and another 13 projects involving other industries were made available for foreign investment. They involved areas of transportation, aviation, education, road, water supply, sewage, etc. In the future, Yunnan Government plans to introduce key projects for foreign investment on an annual basis.

With CEPA and Pan-PRD Cooperation Framework in place, Yunnan will step up efforts

to introduce more investment projects to Hong Kong investors. It will also usher in Hong Kong capital into its various industries. For example, in cultural industries, there will be projects to develop natural sites for shooting films; in tourism, golf courses will be developed and major Hong Kong travel agencies will be encouraged to set up branches and joint ventures in the province via arrangements under CEPA; and in real estate, there will be commercial shopping mall projects, etc. Apart from offering Hong Kong investors various opportunities to invest in the Mainland, these projects also pave the way for closer economic ties between Yunnan and southern and southeast Asia, and provide a channel for Hong Kong investors to establish closer links with the south-western Mainland region and ASEAN markets as a whole. Given these benefits, Yunnan will invite more Hong Kong investors into international business and trade activities in the future. After introducing over US$100 million projects at the Kunming-Hong Kong Investment & Trade Fair held in June 2004, Yunnan has decided to launch even more project development opportunities to Hong Kong investors. It also plans to invite Hong Kong investors to the China Kunming Import & Export Commodities Fair to be held in June 2005. The event has already received support from the Hong Kong Trade Development Council.

According to the Yunnan Government, the areas for investment by Hong Kong investors

cover infrastructure, real estate construction, recreation and entertainment, food processing, etc. To date, there are over 1,000 Hong Kong-funded enterprises in Yunnan, with US$1.7 billion worth of contracts and a utilised investment totalling US$680 million, accounting for 40% of total foreign direct investment. Investment from Hong Kong constitutes the largest share of foreign direct investment in Yunnan Province.


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Hekou in Yunnan Bridging Cooperation with Vietnam

At the recently concluded Fourth Sino-Vietnam (Hekou) Border Economic & Trade Fair, Yunnan revealed that of all economic cooperation with ASEAN countries, the province’s tie with Vietnam is developing most rapidly. In January-November 2004, the volume of exports and imports between Yunnan and Vietnam exceeded US$300 million, representing several times growth over the US$54 million recorded in 1998. As one of the best gateways in China’s south-western region for Sino-Vietnam trade, Hekou has become the largest trading port in Yunnan and even in the south-western region as a whole.

Enhancing infrastructural construction in coordination with growth of trade and economic activities

Hekou in Yunnan and Lao Cai in Vietnam are divided by a river, and the

Yunnan-Vietnam Railway, Kunming-Hekou Highway and Honghe River navigational transport route together form a pivotal transportation network between the two sides. Since 1992, when the State Council approved Hekou as an opening city and a national Class I port, merchandise imports into and exports out of the this city have increased year after year, a considerable part of which involved trade with south Asia. Given the increasingly close bilateral trade ties between Yunnan and Vietnam, Yunnan has undertaken greater efforts to improve communications and construct higher class border highways. Works to transform the China-Vietnam “metre railway1” into “standard railway2” will commence in 2005; and discussions will be made with Vietnam to open the sea-going navigation route of Honghe River. Honghe Hani-Yi Autonomous Prefecture is planning for a large international port area which would span three square kilometres and involve an investment of Rmb1 billion. According to plans, Lao Cai which abuts Hekou port would become the third largest city in Vietnam. Vietnam will build in the city a large international port, a 360-hectare Kim Thanh Business District, and three industrial parks: Dang Long Industrial District, Tan Pha Industrial District in east Lao Cai and Duyen Ha Industrial District in north Lao Cai. The “Two corridors, one circle” lay-out gives more room to industrial development

During his visit to China in May 2004, Vietnamese Premier Mr. Phan Van Khai

proposed to Chinese Premier Mr. Wen Jiabao a “two corridors, one circle” lay-out, which refers to “Kunming-Hanoi Economic Corridor”, “Nanning-Hanoi Economic Corridor” and “Beibu Bay Economic Circle”. The two economic corridors form a Y-shape, intersecting at Hanoi, with end points at Kunming and Nanning. Meanwhile, the sea-going routes in the south-western Mainland region lead to Beibu Bay; the “Beibu Bay Economic Rim”, in turn, covers Guangxi, Guangdong, Hainan, the coastal areas of north Vietnam, and a number of harbours. Currently, the Mainland and Vietnamese governments are actively working

1 Railways with track distance of 1,000 millimetres. 2 Railways with track distance of 1,435 millimeters, also known as large tracks.


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towards establishing the “two corridors, one circle” layout. The “Two corridors, one circle” arrangement has a distinct feature – a clearly defined

industrial segmentation which includes the PRD in the first segment, Guangxi and Yunnan in the second segment, and Vietnam in the third segment. In the first segment are PRD manufacturing industries such as electronics and communications devices, home appliances, electric machines and special hardware that have developed substantial competitive edge in the market, and are better equipped to transform into capital- and technology-intensive industries. In the second segment are industries of high labour and material contents that are gradually being attracted to shift their production bases to provinces such as Guangxi and Yunnan. Meanwhile, Guangxi and Yunnan enjoy comparative edge over Vietnam in the third segment in the industries of electrical machinery and chemical products for daily use, in having developed reasonable technological capacity and achieving economies of scale. With abundant natural resources, Vietnam has high demand for Mainland industrial and consumer products, which are reasonably priced and of good quality. The three industrial segments will provide an even wider room for cooperation in the setting of “two corridors, one circle”. As the second industrial segment in this setting, Yunnan enjoys an advantageous geographical location and plays an important bridging role in the “two corridors, one circle” plan. These will give Yunnan substantial room for future economic development.

In the “two corridors, one circle” strategy, Hekou, with its unique geographical location,

has become a key port for opening up southern China to the outside world. To highlight the geographical advantage of its port, Hekou is not only speeding up logistics-related construction, but also streamlining the procedures for the flow of travellers. In June 2004, the State Council granted Hekou port the right to issue visas, making it the first port authorised to issue visas at the Sino-Vietnam border. This has effectively facilitated merchandise trade and flow of people between Yunnan and Vietnam. Hekou’s role as a bridge between China and Vietnam deserves the attention of Hong Kong investors


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Guiyang Developing into a Recycling Economy and Ecological City

Guiyang City is the first city approved by the State Environmental Protection Administration of China to pilot test development of recycling economy. On November 3, 2004, the city promulgated a “Regulations on Guiyang’s Development of a Recycling Economy and Ecological City” to promote its development of a recycling economy and regulate the behaviours and practices of the government, enterprises and the public. The “Regulations” provide Guiyang with a system of legal protection towards such a development direction.

Recycling Economy

Recycling economy aims to generate higher economic benefit, use less resources, lower environmental pollution, and increase employment opportunities. It promotes the development of an economy that is in harmony with the environment; aims to lessen the volume of resource consumption by recycling products and converting wastes into resources; and reorganises production processes by adopting the concept of the cycle wherein resources are converted into products and can eventually be recycled for use on other production processes. The aim is to achieve the best quality of production, most suitable level of consumption, and the least volume of wastage. In March 2002, the Guiyang Municipal People’s Government decided to develop a recycling economy and construct an ecological city, and received approval from the State Environmental Protection Administration to become the first pilot city in the Mainland for such development.

Planning for a recycling economy and ecological city

Although gifted with abundant resources, Guiyang remains a lagging economy in the western Mainland region. The city is beset with depleting resources, low utilisation of recycled resources and a fragile ecology. To solve these problems, Guiyang has made it its long-term objective to develop into a recycling economy and ecological city. Over the next 20 years, Guiyang will set up an economic system that is focused on recycling resources, and will develop into an ecological city that boasts of reasonable allocation of resources and harmonious relationship between man and the natural environment.

The recently adopted “Regulations” bans projects that are not in accordance with the

overall industrial plan of Guiyang; projects that waste resources and energy; projects that damage the ecology; and projects that causes pollution to the environment. The “Regulations” requires manufacturers to adopt measures consistent with a recycling economy;


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encourages and supports the application of waste classification; and promotes the use of energy and water conserving products in newly constructed projects and urban public facilities. A fine of Rmb10,000-100,000 will be imposed on those violations.

Meanwhile, Guiyang’s “General Plan of Building a Recycling Economy and Ecological City” has passed the verification of experts led by the State Environmental Protection Administration, and has been submitted to the Standing Committee of the Municipal People’s Congress for final approval. Once approved, departments concerned will break down the plan into more detailed project plans and reform the existing mode of operation. They will guide, inspect and examine related works of local departments in various areas to ensure that the direction of developing a recycling economy and ecological city is followed. Guiyang has already started several pilot programmes of recycling economy in the areas of agriculture, industry and consumption: Yongle Village Nuisance-free Fruit and Vegetable Base in Wudang, (National) Ecological Base for Demonstration of Phosphor and Coal Chemical Industries in Kaiyang, Recycling Economic and Ecological Industries Base of Coal and Chemical Industries in Qingzhen Town, etc. Kaiyang is also extensively publicising and educating the public regarding the benefits of promoting a recycling economy and creating an ecological city; its efforts have so far gained wide public support. Construction of recycling economies and ecological cities attracting attention

Guiyang’s initiative to develop a recycling economy and ecological city has attracted

wide attention from home and abroad. Yankuang Group from Shandong Province has already decided to cooperate with Kaiyang Phosphor Group to jointly develop a (National) Ecological Base for Demonstration of Phosphor and Coal Chemical Industries. Yankuang has invested Rmb2.5 billion into the project. In addition, there are more than 20 other similar projects that have successfully found partners and investors. These projects involve a total capital of Rmb430 million. According to the Guiyang Government, the United Nations Development Program (UNDP) has commended the measures adopted by Guiyang in promoting the development of recycling economy and ecological city, and named Guiyang as the sole pilot city of sustainable production and consumption among developing countries. The UNDP hopes to use Guiyang as a model to promote adoption of recycling economy in other developing countries. The German government also decided to give key support to Guiyang’s construction of a recycling economy under the Sino-German framework of environmental protection and cooperation.

As for China, building recycling economies and ecological cities is an emerging trend,

and most of the work involved is currently undertaken through cooperation with foreign investors. Under the CEPA framework, Hong Kong-funded enterprises can take part in environmental protection projects, and opportunities can be explored via Guiyang. With common awareness on the need to protect the environment rising, other Mainland provinces are expected to develop along this trend.


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Energy Becomes One of Guizhou’s Pillar Industries

Given the opportunities arising from China’s Western Development, Guizhou has sped up the “west-to-east electricity transmission” in the past five years. By 2004, the value of Guizhou’s electricity output has exceeded that of traditional industries such as tobacco and liquor industries. With a sizeable scale and ability to generate broad benefits, energy has become a pillar industry of the province. As an important base of energy supply in China, Guizhou’s potential for further development is becoming more apparent. Investment surged as demand for west-to-east electricity transmission rises

As the only energy giant in China that is gifted with both hydropower and thermal power resources, Guizhou has since year 2000 constructed seven power stations, with a newly installed capacity of 5.78 million kilowatts. By end-2004, the province’s total installed capacity has reached 10.74 million kilowatts. Major projects include: the hydropower plant in the Wujiang River basin and a pit thermal power plant.

Such large-scale investments were undertaken mainly to meet the urgently rising

electricity demand in south China. In 2000, the governments of Guizhou and Guangdong entered into a contract committing Guizhou to supply electricity to Guangdong. At that time, Guizhou’s supply of electricity was in surplus, and the agreement generated considerable income for the province. Despite rapid economic growth in recent years, which has led to electricity shortage in Guizhou, the Guizhou Government continued to honour its obligation of transmitting electricity to Guangdong. In 2003, Guizhou transmitted about 9.2 billion kilowatt-hours of electricity to other provinces. The peak load transmitted to Guangdong was 1.92 million kilowatt-hours, and this was completed when Guizhou was experiencing a shortage in electricity of more than 6 billion kilowatt-hours, causing it to restrict its own level of electricity consumption. In 2004, Guizhou expected electricity shortage in the province to exceed 9 billion kilowatt-hours and which would result in a loss of production equivalent to at least Rmb40 billion. To resolve this problem, the only way out would be to continue investing in electricity generating facilities. Economic growth driven by the energy sector

According to Guizhou Electric Power Corporation, the province will invest more than

Rmb10 billion per year on fixed assets in the electricity sector during the “Tenth Five-year Plan”, boosting the province’s industrial output growth by over 3%. The electricity industry has become the second biggest contributor to tax payments, next to tobacco; electric power companies paid an estimated Rmb2 billion in value-added tax in 2004 (Rmb1.9 billion in 2003). Driven by the rapid growth of electricity sector, annual production of coal has risen from 33 million tons in 1999 to 78 million tons in 2003, and is estimated to have increased 28% or by another 10 million tons in 2004.


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Rapid growth in the electricity sector has also stimulated Guizhou’s economy. Most of the electric power stations engaged in the “west-to-east electricity transmission” are located in the backward region of north-western Guizhou. Statistics indicate that in the coal industry alone, a power plant with 4 sets of 300,000 kilowatt-hour capacity generators can generate jobs involving coal exploitation, transportation, loading, catering, etc., and employing 30,000-50,000 people. The industry hence contributes substantially to people’s livelihood.

While continuing to develop its energy industries, Guizhou expects to expand its

installed capacity to 30 million kilowatt-hours by 2010, with 10 million kilowatt-hours’ load transmitted outside the province. To achieve this, the province is attracting the participation of various forms of investment and inviting large power and coal enterprises to come to the province. After setting up enough equipment, Guizhou can move on to develop its industrial chain encompassing aluminium and aluminium processing, and phosphor and phosphor chemical engineering – development of which are highly-related to the electricity sector. In particular, Guizhou will speed up the development of refining and processing sub-sectors of these industries to introduce higher value-added output. With such improved prospects, the developments in Guizhou’s economy and market are worth enterprises’ attention.


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Sichuan Consolidates Preferential Investment Policies Offered by Local Governments

Sichuan Province will clean up and consolidate the numerous preferential investment

policies issued by governments at the various city, prefecture, county and district levels. The move will streamline policies that have led to an accumulation of conflicts over time and caused damages to the credibility and image of the government. Policies that are no longer applicable under the current environment will be cancelled once and for all. Local investment promotion policies are dispersed and untimely

As announced by the provincial government, practical plans will be worked out to clear up these policies, especially those involving issues of taxation, land use, supply of water, electricity and gas. Over the years, a number of preferential policies have been issued in Sichuan to encourage external investment; however, with the change in investment environment and policy changes introduced by the Central Government over time, implementation of these policies started to face complications. Some of the policies contradict existing laws and regulations; some prove unenforceable due to changes in macro policies; some cannot be implemented due to problems in the finances of the local government; and some were simply scrapped due to a change in the officers-in-charge.

Existing policies that need to be cleared up include: tax policies that violate national

regulations such as those extending the preferential tax treatment period, those expanding the scope of applicable preferential tax treatment; those that extend preferential tax treatments reserved for state-level high-tech industrial zones to provincial-level high-tech industrial zones; policies that set land prices at exceptionally low levels or even reduced to nil; and policies that guarantee investors would enjoy exceptionally low charges for consumption of water, electricity and gas. The last one, for example, could no longer be honoured due to adjustments in China’s macro policies and the general increases in water, electricity and gas prices. If not cleaned up, these policies will give misleading signals to investors and stall economic development. Preferential policies that will be affected

In this round of exercise, however, Sichuan aims only to clarify the scope of application of these preferential policies. It is not the provincial government’s intention to revoke the rights of the local governments to set policy initiatives for city, prefecture, county and district levels. Policies that violate existing laws and regulations must be abolished in time, and articles inconsistent with national and provincial stipulations must be amended. Those policies that are in line with the stipulations of the Central Government measures will not be affected. In accordance with the principle of “whoever issues a policy must take charge of resolving the problems”, the measures to be undertaken by each city, prefecture, town or


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district may differ on a case by case basis.

In clearing up these policies, the provincial government hopes to gain investors’ understanding by explaining to them that certain preferential policies are no longer enforceable due to changes in Central Government laws and regulations. Preferential policies and special commitments granted on a case by case basis by local governments and in line with Central Government laws and regulations will continue to be implemented as much as possible. To handle the more serious cases, the provincial government will organise a joint investigation team led by a provincial-level steering committee. Finally, all levels of the government and provincial departments must carefully handle foreign investors’ complaints; all major complaints must be resolved under enhanced monitoring of the provincial-level supervision office and the centre for handling foreign investors’ complaints.

Relevant investment information will be clearer after the exercise

Since the implementation of China’s Western Development strategy, Sichuan, like the other western provinces/regions, has strived to promote investment. To attract more investment, local officials have, under many circumstances, made commitments to foreign investors even if they are inconsistent with the laws and regulations set by the Central Government. As a result, foreign investors encountered inconveniences such as miscalculated budget when they find out that some of the preferential policies cannot be enforced at all. While introducing preferential policies can help attract investors, if they cannot be enforced, the situation would be worse than if these policies were not introduced in the first place. After the policy clean-up exercise and with clear explanations to scrapped policies provided, even if there will be fewer preferential policies than before, investors will have more confidence in Sichuan’s investment climate, the government can enjoy better reputation. Hong Kong investors in Sichuan should find out in what ways the exercise will affect their enterprises, and take this opportunity to voice out their views on Sichuan’s investment environment.


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Sichuan Asks Financial Institutions to Support Export-oriented Enterprises

To ease the capital funding burdens of export-oriented enterprises in Sichuan, the

provincial government office issued a “Guiding Opinions on Enhancing Bank-Enterprise Cooperation and Supporting Export Expansion”. The “Opinions” suggested financial institutions to render stronger support to export-oriented enterprises. Suitable financial assistance should be given to small- and medium-sized enterprises

According to provincial statistics, there are currently 4,800 qualified import and export enterprises in the province, many of which are newly qualified, small- and medium-sized enterprises, with some of them privately-owned. They lack liquidity and it is hard for most of them to provide collaterals and guaranties to obtain financing. To support the development of these enterprises, Sichuan has called on financial institutions to charge lower loan interest rates, helping them to generate more foreign exchange receipts and make bigger contribution to the province’s economic growth. Loan interest can be appropriately lowered for enterprises with strong foreign exchange receipts (such as those classified as “honoured enterprises for the collection of export exchange” by the State Administration of Foreign Exchange (SAFE) and the Ministry of Commerce); and according to the regulations set out by the SAFE the loan interest rate can be lowered by as much as 10%.

Classifications of Enterprises for the Collection of Export Exchange

SAFE classifies enterprises according to the status of their collection of foreign exchange receipts from exports. Classification is made according to the ratio of foreign exchange receipts and the ratio of verification and write-off of the declared foreign exchange value. The former refers to the proportion of actually received foreign exchange against the sum of foreign exchange receipts that is supposedly due during the period of appraisal. The latter refers to the number of counterfoils returned after verification and write-off as a proportion of the total number of counterfoils received during the period of appraisal. Honoured enterprise: ratio of foreign exchange receipt at or over 95% Up-to-standard enterprise: ratio of foreign exchange receipt = 70-95%. Risky enterprise: ratio of foreign exchange receipt = 50-70% Highly risky enterprise: ratio of foreign exchange receipt below 50% The precondition for classifying enterprises is that the ratio of verification and write-off of the declared foreign exchange value must reach 80%, otherwise an enterprise will automatically be graded as “Highly risky enterprise”.


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Memorabilia of Pan-PRD Regional Cooperation

Guangxi Western Forum of China 2004 (November 18-19, 2004) The Forum was held for the third time since China’s Western Development strategy was implemented five years ago. This Forum has brought in opportunities to introduce to domestic and overseas investors the Chinese government’s unswerving initiative to develop and spur the growth of the western region, and to discuss how to seize the new opportunities created by China’s macro policies for the western region. Framework agreement on the regional cooperation of road transportation in the western region (November 25, 2004) To establish the mechanisms for interchanging views and cooperating in the area of road transportation development, jointly build a transport development circle in the western region, and promote development of the national economy in the western region, the highway transportation administrative bureaus and the transportation press offices of 12 provinces/autonomous regions/municipality, including Chongqing, Sichuan, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Ningxia, Qinghai, Xingjiang, Inner Mongolia and Guangxi have reached a cooperative framework agreement that is in accordance with existing laws and relevant policies. The 8th ASEAN and China Leaders Summit (November 29, 2004) During the event, leaders of China and ASEAN countries signed the Framework Agreement on China-ASEAN Comprehensive Economic Cooperation, Commodities Trade Agreement and related Agreement on China-ASEAN Dispute Settlement Mechanism. Prior to that, both sides have already signed the Memorandum of Understanding on Transportation Cooperation on November 27. The signing of the above three agreements has paved the way for establishing the world’s largest free trade zone in 2010. Hepu County of Guangxi hosted an investment promotion event in Hangzhou (November 30, 2004) During the event, the delegation of Hepu County Government signed agreements on 6 projects, involving an investment volume of Rmb3.284 billion. Beihai City in Guangxi and Lugano in Switzerland became sister cities (December 10, 2004) As one of the 14 coastal cities approved by the State to open up in 1984, Beihai City in Guangxi has developed into an internationally famous coastal tourist city over the past 20 years. Aside from Lugano, it has recently forged sisterly ties with a number of foreign cities including Suva in Fiji, Tulsa in the United States, and Yatsushiro-shi in Japan.


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Baise City promoted urban construction projects in Nanning (December 15, 2004) Baise Municipal People’s Government publicly launched a series of projects involving the development of land, construction of bridges and highways for investment invitation. Included in the event were the city’s Riverside Phase II development project and Jiangnan New District development project, as well as bridges and highways construction projects. Guilin and Fujian signed labour cooperation agreement (December 16, 2004) Guangxi and Fujian held a signing ceremony in Nanning to formalize their labour cooperation agreement. The objective is to establish mechanisms that would give rise to long-term benefits from labour exchanges between the two provinces, so that their cooperation will bring better results. Yunnan The 4th China Vietnam (Hekou) Border Trade Fair (November 23 and 29, 2004) The Fair featured over 170 enterprises from Guangzhou, Shenzhen, Foshan, Hong Kong SAR, etc. Total trading volume exceeded US$70.08 million, an increase of 114.31% over the last forum, with 19 projects signed. It also generated total tourism revenues of Rmb3.7 million from over 15,000 domestic and foreign tourists. During the event, trade forums and project presentations were also held and attended by Chinese and Vietnamese economists and scholars. Yunnan promoted tourism enterprises in Zhejiang (November 29, 2004) Mr. Zhao Qiwei, Vice Governor of Yunnan Province, led a delegation which consisted mainly of tourism enterprises to promote new tourist products in Zhejiang. They presented the five new features of Yunnan’s tourism in 2005, including new theme, new products, new activities, new market mechanisms and new facilities. The activity attracted a lot of attention in the tourism circle of Zhejiang. Over 20 tourism enterprises from Yunnan were in business negotiation with more than 30 Zhejiang enterprises. Yunnan Green Food & Flower Expo (During December 2 and 4, 2004) The expo aims to promote reform and restructuring of the agricultural industry and spur the growth of exports of green food and flowers, as well as promote economic and trade cooperation between Yunnan and Hong Kong in the field of agriculture. Kunming introduced investment projects in Shanghai (December 6, 2004) In Shanghai, Kunming Municipal People’s Government hosted the Kunming Investment Project Presentation 2004. The event featured 77 key projects involving a total investment of US$1.7 billion. They include such areas as information industry, automobile industry, high-tech pharmaceuticals, urban transportation, urban reconstruction,


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electromechanical and chemical engineering, characteristic agriculture, tourism development, SOE reform, culture and entertainment, and educational facilities. The First Kunming Cultural Industry Expo (December 19-21, 2004) The Expo introduced 125 investment projects in the cultural industry that are highly exemplary, with good operation, huge market potential and unique brand characteristics. During the three days’ time, a total of 92,000 visitors attended the Expo. There were 2 rounds of contract signing of cultural projects, with a total of 45 projects signed worth Rmb1.158 billion in all. Guizhou Ningbo-Duyun Economic and Technological Cooperation and Investment Promotion Forum (November 30, 2004) Talks were held in Ningbo, introducing over 60 projects of Duyun City for investment promotion. They involved agricultural industrialisation, industrial projects and tourism development projects. Officials of Zhejiang’s Department of Science and Technology conducted field study in Guizhou (During November 22 and 24, 2004) 15 officials from Zhejiang’s Department of Science and Technology discussed prospects for cooperation in the fields of science and technology, and signed 7 cooperation agreements totalling Rmb30 million. They included fields such as pharmaceuticals and healthcare, forestry, chemical engineering, etc. Guizhou International Symposium on Environmental Protection and Sustainable Livelihood (December 8, 2004) The Symposium aims to enhance the role of non-government organisations in environmental protection and poverty reduction in Guizhou. Ever since 1992, Guizhou’s environmental protection departments have clinched over 30 cooperation projects, with nearly Rmb1.8 billion in capital absorption and outstanding results in international cooperation. Guizhou Provincial People’s Government officially signed an agreement with the Ministry of Education to build Guizhou University (December 23, 2004) According to the agreement, the Ministry of Education will provide financial support if possible, and organise other universities under the Ministry of Education to render long-term assistance to Guizhou University.


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Sichuan China International Wine Expo 2004 (November 26-29, 2004) The Expo facilitated transactions of over Rmb100,000. Sichuan’s wine

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